On Thursday, Kepler Cheuvreux analyst Douglas Lindahl downgraded Saab AB shares from Hold to Reduce, while increasing the price target to SEK275 from SEK245. Lindahl’s assessment reflects a cautious outlook on the European defence sector’s growth rates, which he believes are becoming overly optimistic.
The analyst acknowledged Saab’s strong position within the European defence market, noting its high-quality portfolio, particularly in antitank missiles and air defence, which have shown impressive growth rates and margin potential. These factors previously warranted a premium rating and a strong recommendation as a core holding in the sector.
Lindahl pointed out that the growth rates are expected to normalize following the resolution in Ukraine and after Sweden achieves its defence spending goal of 2.6% of GDP by 2028. However, the analyst now projects that European defence spending could reach 3% of GDP by 2030 and 3.5% by 2035, indicating that the peak in spending may occur later than initially anticipated.
The revised estimates suggest that Saab could see its sales grow from an estimated SEK100 billion in 2027 with a 10.5% margin to potentially SEK150 billion by 2034, assuming an 11.5% margin and that all divisions meet their targets. Despite the increased price target, the downgrade to Reduce suggests a note of caution amid these long-term projections.
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