'High valuations demand a selective approach' - GS starts European defence

RENK AG

19/09/2025 10:29

** Goldman Sachs initiates coverage on European defence sector in what it calls the region's "most significant rearmament cycle since the early Cold War build-up"

 ** "We believe a nuanced approach to stock selection is required," it says, pointing to defence stocks' high valuations

** GS expects Europe to reach the 3% of GDP on defence goal by 2030, as doubts over US security guarantees strengthen resolve for European strategic autonomy

** It starts BAE Systems BAES.L and Rheinmetall RHMG.DE with "buy" and Thales TCFP.PA with "sell"

** GS names BAE Systems its "highest conviction Buy", citing its "unmatched" capability and strong cash conversion, while it says Rheinmetall "valuation still does not reflect the mid-term growth outlook"

** GS says Thales does not convince on Cyber and Digital, is cautious on Space growth outlook, warning of near-term political disruptions in France

** It also initiates Dassault Aviation AM.PA with "sell", citing a lack of conviction in group's civil units and a priced-in Rafale growth outlook

** Shares in Dassault Aviation drop 2.5% while shares in Thales are down 1.5%

** It starts Leonardo LDOF.MI and RENK R3NK.DE with "neutral", saying that valuations leave little room for error

(Reporting by Dimitri Rhodes and Emanuele Berro)

((Dimitri.rhodes@thomsonreuters.com))