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Investing.com -- Bank of America downgraded Swedish defence group SAAB AB to Underperform from Neutral on limited earnings visibility beyond 2027 and a stretched valuation that based on ambitious long-term growth.
The brokerage said SAAB remains one of the strongest names in Europe’s defence sector from a topline growth perspective. But its premium valuation, about 43% above peers, requires high-teens organic sales growth through 2030, which seems unlikely.
BofA also trimmed its price objective on the stock to 444 Swedish crowns from 428, below the current market price of 474.70 crowns.
The brokerage said Sweden’s planned increase in defence spending to 3.5% of GDP by 2030 should lift SAAB’s domestic revenue, currently about 41% of its topline, by 14% through the end of the decade.
But it expressed doubts about the company’s ability to deliver similar growth outside Sweden, especially as visibility in key international markets like Europe remains limited.
While SAAB raised its 2023–27 organic revenue growth target to 18% earlier this year, it simultaneously lowered its free cash flow conversion goal due to heavier-than-expected investment needs.
BofA said it sees potential downside to the company’s valuation multiples in the second half of 2025, citing limited near-term earnings momentum, lower exposure to defence electronics versus peers, and constrained capital allocation flexibility.
The analysts acknowledged continued strength in SAAB’s Surveillance segment, roughly 30% of its portfolio, but expect post-2030 slowdown in other divisions such as Dynamics, Kockums, and Aeronautics.
That mix, they said, may leave SAAB less well-positioned than names with more exposure to long-cycle, electronics-heavy platforms.
SAAB shares have been among the best performers in Europe’s defence rally this year, trailing only German names like Rheinmetall (ETR:RHMG) and Renk, which BofA said had more substantial earnings revisions and revenue visibility.
