- NATO’s new 5% defense spending goal could fuel a decade-long arms race.
- Defense stocks like V2X, General Dynamics, and Lockheed Martin are lining up for a breakout.
- As geopolitical budgets swell, so do investor opportunities—if you know where to look.
- Spot undervalued tech winners before the crowd with InvestingPro’s stock screener. Subscribe now to unlock access to InvestingPro’s stock screener for up to 50% off with the summer sale.
At the NATO summit in The Hague, the alliance’s member states reached an agreement on a gradual increase in defense spending, with a target of 5%. This figure is to be broken down into 3.5% strictly for defense and 1.5% for other expenditures, including infrastructure development, research, and innovation. At this stage, only Spain is raising objections, diplomatically insisting on the 2% level—which, however, was met with a typical and incisive response from Donald Trump, who referred to the Spaniards as “stowaways.” Regardless, the target date for achieving this level is 2035, and it is certainly questionable whether all members will meet their commitments within the next decade. So we’ll take a look at companies with strong growth potential in the defense industry sector, which could benefit from increased arms expenditures.
1. V2X Inc – More Than 20% Growth Potential
V2X Inc (NYSE:VVX) is a defense-related company providing a wide range of services in areas such as radar systems, critical infrastructure defense, and multi-role aircraft. According to the fair value index, the company boasts more than 20% growth potential with a moderate financial condition.
Source: InvestingPro
Significantly, the company has consistently reported positive net income for the past three quarters—something that has not been the norm in recent years. The latest results showed earnings per share of $0.98, beating the consensus by 5.1%. If we get a bullish technical signal in the form of a breakout above $52 per share, this will be an interesting company to consider from a buyer’s perspective.
2. General Dynamics Corporation With an Impressive Fundamental Profile
Another company on the list is General Dynamics Corporation (NYSE:GD), which specializes in building military sea and land systems. The upside potential is estimated at just over 12%, amid a continued moderate uptrend since around mid-February. What stands out is the company’s fundamental profile, which shows a full range of positive indicators.
Source: InvestingPro
The company is also clearly attractive to dividend investors, as evidenced by its 47-year payout history and consistent dividend growth over the past decade. Since 2019, net income has remained stable, with a visible upward trend projected in 2024 and 2025.
3. Lockheed Martin Corporation Pending a Technical Signal
The last company on the list is Lockheed Martin Corporation (NYSE:LMT), a well-known American brand in the defense industry. As with the aforementioned competitors, the key positives include stable net profits and an upside potential of just under 14%. However, the technical chart remains important here, showing a prolonged consolidation since the beginning of the year, in the $420–490 per share range.
If pressure on the upper boundary continues, we could see the formation of an ascending triangle pattern—a bullish chart formation—which could result in a breakout. In such a scenario, the minimum expectation would be an attempt to reach fair value slightly above $520 per share.
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Disclaimer: This article is written for informational purposes only. It is not intended to encourage the purchase of assets in any way, nor does it constitute a solicitation, offer, recommendation or suggestion to invest. I would like to remind you that all assets are evaluated from multiple perspectives and are highly risky, so any investment decision and the associated risk belongs to the investor. We also do not provide any investment advisory services.