Rheinmetall Shares Start Year Strong: Forecast Cut, Analyst Remains Bullish

Rheinmetall AG shares (ETR:RHM) continue its impressive 2026 ascent, showing resilience even in the face of a price target cut.

While a reduction in target price often signals concern, Berenberg's revised outlook on Rheinmetall shares, lowering the firm's price target to EUR 2,200 from EUR 2,340 while maintaining a ‘Buy' rating, suggests underlying confidence in the company's trajectory.

The markets have responded positively to U.S. defence budget increases, and Rheinmetall's strategic moves, with the share price already appreciating by 20.24% year-to-date, reaching €1,886.50.

A key driver of market sentiment has been Rheinmetall's proactive approach to strategic partnerships. The December 2025 memorandum of understanding with Lockheed Martin to establish a European missile joint venture demonstrates a commitment to enhancing integrated air and missile defense systems, long-range strike capabilities, and precision-guided munitions. This collaboration has already garnered positive attention, with BofA Securities raising Rheinmetall's price target to €1,900 and maintaining a ‘Buy' rating following the announcement.

Further solidifying its market position, Rheinmetall expanded its naval defense capabilities through the acquisition of Lürssen's military division in September 2025. This move diversifies Rheinmetall's portfolio, positioning it as a comprehensive defense solutions provider across multiple domains. Additionally, a partnership with Finnish satellite manufacturer ICEYE in May 2025 resulted in a €1.7 billion order from the German Army, enhancing space-based reconnaissance capabilities.

Rheinmetall's strategic decision to divest its civil business activities in December 2025 underscores its commitment to focusing on defense, aiming to capitalize on growth opportunities within the sector. This realignment is viewed favorably by the markets, signaling a clear strategic direction.

Financial Performance and Analyst Outlook

The company's robust financial performance has been a key driver of its stock performance, as well. Rheinmetall reported a 20% increase in consolidated sales in Q3 2025, reaching €7.5 billion, and an 18% rise in operating results to €835 million. The defense segment experienced a 28% sales growth, with an operating result margin of 13.6%, demonstrating strong profitability and operational efficiency.

Analyst sentiment has remained largely positive towards Rheinmetall. In addition to BofA Securities' price target increase, Bernstein raised its target to €2,050 in December 2025, citing an improved balance of risks and potential upside from continued defense order activity. The company's market capitalization has also surpassed that of Volkswagen in late 2025, reflecting the growing investor confidence in the defense sector amid increased European military spending.

Despite the overwhelmingly positive trajectory, Rheinmetall's stock has experienced some volatility due to geopolitical developments. Reports of progress in Ukraine peace discussions in December 2025 led to a temporary decline in defense stocks, including Rheinmetall, as markets anticipated potential reductions in defense spending.

The trimmed price target from Berenberg, therefore, needs to be viewed in the context of the overall positive sentiment surrounding Rheinmetall. While geopolitical developments can introduce volatility, the company's focused realignment towards defense and proactive market positioning suggest a strong outlook for sustained growth. This could mean that the markets will continue to view Rheinmetall as a strong prospect, despite short-term fluctuations.