BAE Systems Shares Lower Despite Price Target Raise – The Latest Look

BAE Systems share price (LON:BA) has fallen this morning, currently down 0.58% despite an analyst upgrade from JPMorgan.

JPMorgan analyst David Perry increased the firm's price target on BAE Systems to 2,400 GBp from 2,200 GBp, whilst maintaining an Overweight rating. This upgrade reflects a bullish outlook, driven by BAE Systems' exposure to naval and submarine programs, areas expected to benefit from increased strategic focus on the Arctic and northern Europe amid rising geopolitical tensions.

Escalating tensions, including the potential for U.S. intervention in Iran and unrest in Venezuela, are anticipated to drive increased defense spending, further bolstering BAE Systems' prospects.

However, this positive sentiment contrasts with a downgrade from Deutsche Bank. Deutsche Bank lowered its rating on BAE Systems from ‘Buy' to ‘Hold,' reducing the price target to 2,140p from 2,220p. The bank cited limited upside potential and concerns over the company's ability to exceed FY25 expectations, particularly due to disappointing Maritime margins projected at 6.5% versus the guided 8%.

This divergence in analyst opinions highlights the complexities influencing investor sentiment towards BAE Systems, potentially accounting for the pause in momentum.

Adding another layer to the picture, Morgan Stanley adjusted its price target in December, raising it to 2,203p from 2,158p, while maintaining an ‘Overweight' rating. Their projections for FY25 group revenue stand at £30.7 billion, a 9.1% increase on a constant currency basis, aligning with the company's guidance range of 8-10%. Adjusted EBIT, however, was forecast at £3.25 billion, toward the lower end of management’s guidance, with the adjusted EBIT margin expected to remain flat at 10.6%. This suggests that while revenue growth is expected, margin expansion may prove challenging.

In July 2025, BAE Systems reported an 11% year-on-year increase in first-half sales to £14.62 billion, driven by major U.S. contract wins and strong performance in its Platforms & Services division. Consequently, the company raised its full-year sales growth forecast to 8-10%. Despite this positive revision, shares slipped 2.7% due to a decline in order intake to £13.2 billion from £15.1 billion in the corresponding 2024 period. This decline in order intake raises concerns about future revenue visibility and potentially explains some of the market's hesitation.

The contrasting analyst opinions, coupled with concerns over margin pressures in the Maritime division and a decline in order intake, appear to be weighing on investor sentiment. While geopolitical tensions and increased defense spending could benefit BAE Systems, challenges in maintaining profitability and securing new orders are creating uncertainty. 

After gains of 21.58% for the shares over the past month of trading, and 73.46% over the past year, some pullback off highs around a psychologically important level could be expected. Wall Street clearly expects more to come from shares, with geopolitical uncertainty, and increased defence spending seen as continuing. Whether the company can execute to those valuations will be seen in time.