Broker Citi has upgraded its price target on BAE Systems PLC (LSE:BA.) as defence falls back under the spotlight.
The reiterated buy note comes as Germany pledges to increase defence spending to 2% of GDP in a wider reassessment of European policy following Russia’s invasion of Ukraine.
Citi analyst Charles Armitage also said the exclusion of defence in environmental, social and governance (ESG) metrics may be a temporary concern, as governments push for defence to be recognised as a social good.
“As we published last month, we believe the social good of defense, in particular with regard to SDG16, is being reassessed and may lead to defense inclusion in the EU social taxonomy,” said analyst Charles Armitage in the note.
Russia’s unilateral invasion of Ukraine may improve Western defence ambitions in the eyes of ethical investors.
BAE’s shares are up nearly 20% since last Wednesday as Russia’s invasion of Ukraine put the focus on Western defence companies.
Citi upgraded its price target for BAE to 878p, representing more than 20% upside on yesterday’s closing price of 725.2p.
The broker increased BAE’s earnings per share forecast by up to 7%.