Crash in the defense sector? Geopolitical conflicts drive up metal prices! Rheinmetall, Sranan Gold, Hensoldt, and RENK

Rheinmetall – Moderate figures kick off downward trend

Rheinmetall shares have fallen significantly since their high of EUR 1,940 and were last trading at around EUR 400 below that level, which has prompted CEO Armin Papperger to make some notable share purchases, either out of conviction or to send a signal to the market. In any case, the second-quarter results are acceptable, showing revenue growth of 9% to EUR 2.4 billion, driven by the defense segment. While EBIT rose by 2% to EUR 276 million, margins and cash flow are currently suffering from start-up costs for new programs and increased investments.

Of course, the Group and management confirm all growth targets and point to the broad, long-term order backlog, which at EUR 63 billion is about six times revenue. Analysts on the LSEG platform continue to rate the stock positively, with average price targets of around EUR 2,065. Morgan Stanley even sees long-term potential of up to EUR 3,000 if European defense spending continues to rise. The medium-term outlook also remains well secured thanks to solid political support, flexible financing structures, and a multi-year ramp-up.

The revenue targets of EUR 40 to 50 billion for 2030 are likely to be secured by new NATO orders. Strategically, Rheinmetall is advancing into promising areas with M&A activities, the sale of civilian divisions, and partnerships with Lockheed, Boeing, and Anduril. There are short-term risks due to delayed order placements and political uncertainties, but structurally, Rheinmetall is clearly positioned as a leading supplier with broad vertical integration and high visibility in the European defense market. Although many investors see their expectations confirmed, the momentum looks rather subdued in the short term. Therefore, buy in at a lower price – how low is difficult to predict. It also depends on how much the specific selling pressure in the boiler increases.

Sranan Gold – In Suriname, the world is still in order

An investment opportunity in gold is currently opening up in Suriname, South America. Canadian explorer Sranan Gold is working intensively in this resource-rich country, whose economy is heavily dependent on gold mining. Around 75% of export revenues come from this sector. In addition to the large Rosebel and Merian mines, thousands of small-scale miners extract gold, often under unregulated conditions. The new player, Sranan Gold, owns the 29,000-hectare Tapanahony project, one of the most promising exploration areas in the country. And this in an environment where predecessor companies have already identified the potential for over 15 million ounces of gold. CEO Oscar Louzada, who has been active in the country for over twelve years, wants to build on successes such as the Antino project in the Guiana Shield with Tapanhony.

Recent exploration results are attracting attention. In the Randy's Pit area, newly opened shafts were sampled by local miners, with hand samples returning peak values of 76.6 g/t and 23.7 g/t gold. The samples, obtained from depths of up to 30 m, were taken from quartz-rich, sericite- and limonite-rich structures, which are classic host rocks for gold in the Guiana Shield. Dr. Dennis LaPoint, EVP Exploration, explains: "These shafts and samples are extremely promising for the potential of the Randy trend and help us understand the orientation of the mineralized structures and accurately plan the first drill program."

In parallel, Sranan has commenced a trenching program to test the continuity of mineralization. The first trench, 150 meters south of Randy's Pit, returned an outstanding hit: three channel intersections totaling 5 meters averaging 36.7 g/t gold. This interval significantly extends the mineralized trend to the south, a zone that was apparently missed by historical drilling. The geology, a contact zone between sheared sediments and granite, is considered an excellent indicator of gold, similar to the neighboring Antino project. LaPoint emphasizes: "This first trench confirms the potential to extend the Randy trend – we are investigating a complex, multi-phase mineralization system with structural stress zones that favor high grades."

Overall, these results mark a dynamic start to the exploration phase at Tapanahony and lay the foundation for upcoming drilling. The stock is jubilant, with yesterday's rise above CAD 0.62 seemingly ending the brief consolidation phase. Speculative investors continue to buy in!

Hensoldt and RENK – The sector is in a sell-off

As we predicted, RENK and Hensoldt in particular have undergone consolidation in recent days. After impressive gains in recent months, the lofty valuations are coming back down again, but they have not yet reached a healthy level. Hensoldt has now fallen from its peak of EUR 108.80 in June to below EUR 79, while RENK's share price ranged from around EUR 86 to EUR 56.50 yesterday. Geopolitical signals have recently contributed to market volatility, as a possible de-escalation in the Middle East or a possible Ukrainian ceasefire are putting defense stocks under pressure in the short term. Things could still get exciting!

Nevertheless, the fundamental outlook remains solid. Hensoldt reported an 11% increase in revenue to EUR 944 million in H1 2025 and confirmed its revenue forecast of EUR 2.5 to 2.6 billion for the full year. At RENK, the defense segment is expected to grow gradually, with margins of over 21% on the cards. JP Morgan's upgrades show great confidence in both companies: the price target for RENK was raised to EUR 87.5 and for Hensoldt to a strong EUR 110. However, the current decline in the share prices of RENK and Hensoldt also shows that investors will eventually take profits and react to political risk signals. In addition, price-to-sales ratios of 4 are too high for Germany in a long-term comparison! There is therefore still room for correction.

The capital markets have many different influences to assess. A combination of defense stocks and gold in the portfolio offers a good opportunity in uncertain times. This is because both asset classes react differently to economic and political events, which reduces the overall risk. Currently, gold stocks like Sranan Gold are favored, while defense stocks are consolidating.