BAE Systems Shares Gain As Bearish Analyst Moves Neutral

BAE Systems (LON:BA) experienced a positive boost in early trading as Kepler Cheuvreux upgraded its rating on the defense contractor. The shift from “Reduce” to “Hold” saw BAE Systems share price climb 1.51% to reach 1,879p, indicating a shift in market sentiment.

The upgrade by Kepler Cheuvreux is primarily attributed to valuation considerations. The firm also increased its price target for BAE Systems to 1,860p, a notable increase from its previous target of 1,540p. The revised target suggests a more favourable view on the company’s inherent value.

BAE Systems has demonstrated robust financial performance recently. The company reported an 11% year-on-year increase in first-half sales, reaching £14.62 billion. This growth was significantly supported by major contracts in the U.S., including an $800 million deal with the U.S. Air Force and a $1.2 billion contract with the U.S. Space Systems Command. As a result of this performance, BAE Systems raised its full-year sales growth forecast to between 8% and 10%, an increase from the previously projected 7% to 9%. However, the share price experienced a dip of approximately 2.7% on the day of the announcement, potentially due to concerns about a slight decrease in the order backlog.

Earlier in 2025, the company faced a setback when an F-35 fighter jet crash during a training exercise in Alaska caused a 3% drop in BAE Systems' stock. As a key partner in the F-35 program, the incident raised investor concerns about potential ramifications for the company’s involvement. Despite the initial negative reaction, the pilot safely ejected, and the U.S. Air Force initiated an investigation into the crash's cause.

BAE Systems has secured several significant contracts and made strategic advancements throughout 2025. These include a five-year contract valued at up to $1.7 billion to supply laser-guidance kits for the U.S. Navy, and a $16 million Phase 2 contract from DARPA for the Oversight program. Additionally, the company opened the Janet Harvey Hall, a state-of-the-art shipbuilding facility in Glasgow.

These developments have contributed to a 63.47% increase in BAE Systems' share price over the past twelve months, reflecting investor confidence in the company's strategic direction and contract wins. A bearish analyst moving to a more neutral outlook is a positive for BAE bulls, who are no doubt eyeing up a retest of that 2,000p level hit last year.