Friday proved to be a difficult session for Germany’s defense sector, with shares of Thyssenkrupp Marine Systems (TKMS) caught in the broader downturn. The stock closed in negative territory, extending a week of notable volatility, despite initially trading higher and the company’s fundamentally solid position.
Sector-Wide Weakness Outweighs Analyst Commentary
A research note from Barclays Capital focusing on Rheinmetall provided a brief focal point during the day. The bank’s analyst, Afonso Osorio, maintained an “Overweight” rating on Rheinmetall but slightly reduced the price target from €2,175 to €2,125. He cited a valuation discount of more than 20% compared to the sector, describing the recent pullback as an overreaction given the firm’s growth prospects. However, this positive assessment from London failed to generate sustained momentum. Rheinmetall shares declined by 3.03%, while HENSOLDT saw a sharper drop of 5.81%. TKMS equity closed approximately 1.95% lower at €82.85.
In contrast, the market debut of defense supplier Vincorion introduced some positive movement. Its shares began trading at €19.30 and settled at €18.70, finishing comfortably above the issue price of €17. This indicates that investor interest in German defense assets remains, even if it wasn’t sufficient to counter the day’s selling pressure on more established names.
Should investors sell immediately? Or is it worth buying TKMS?
Solid Fundamentals Underpin TKMS Outlook
On a weekly basis, TKMS is under pressure, showing a loss exceeding eight percent. However, since the start of the year, the stock remains up by roughly 20%. A Relative Strength Index (RSI) reading of 32.4 suggests the shares are in oversold territory, and the current price sits nearly twelve percent below its 50-day moving average.
The company’s operational performance offers little cause for concern. Following a follow-on order from Norway, TKMS’s order backlog has surpassed the €20 billion mark. First-quarter revenue reached €545 million, supported by a gross margin of 17%. These results were strong enough for management to raise its full-year guidance; instead of potential stagnation, the company now anticipates sales growth between two and five percent. TKMS is targeting an adjusted EBIT margin above seven percent in the medium term.
Investors await second-quarter figures due on May 11. Shortly after, between May and June, the Canadian government is set to decide on awarding a contract for twelve conventional submarines—a deal with a potential value of up to €37 billion. A decision in favor of TKMS would likely swiftly overshadow the current share price weakness.
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