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On Tuesday, BNP Paribas (OTC:BNPQY) Exane resumed its coverage of Indra Sistemas SA (BME:IDR:SM) (OTC: ISMAY), assigning the technology and defense company a Neutral rating with a price target of EUR33.00. According to InvestingPro data, the company has delivered an impressive 98.12% return year-to-date, with shares currently trading near their 52-week high at a P/E ratio of 18.76. The firm’s analyst highlighted this significant increase in Indra’s share value, attributing the rise to the European Union’s strategic pivot towards defense, which is expected to boost defense investments among member countries, including Spain.
Indra Sistemas, with approximately 56% of its EBIT stemming from Aerospace and Defense (A&D), is projected to see this segment grow to represent 73% of EBIT by around 2030. The analyst forecasts an organic revenue compound annual growth rate (CAGR) of 9% in the A&D sector, compared to 4% in Information Technology (IT). Despite the positive outlook for the defense sector, the analyst believes that the current trading price of Indra, at 9.6 times its estimated enterprise value to EBIT for 2026, already reflects the anticipated defense sector growth.
The stock’s performance has been remarkable, with a surge of more than 70% since the beginning of the year. This uptick is largely attributed to the EU’s increased focus on defense, a move that suggests a forthcoming acceleration of defense investments across several European nations, including Spain. Indra Sistemas, which derives a significant portion of its earnings before interest and taxes (EBIT) from its Aerospace and Defense (A&D) division, is expected to see this figure increase as the company benefits from the heightened defense expenditure.
The reinitiated coverage comes at a time when Indra’s position in the market seems to have factored in the opportunities presented by the evolving defense landscape. The price target set by BNP Paribas Exane reflects the analyst’s view that while the company stands to gain from the EU’s defense investment strategy, the potential for additional stock price growth may be limited, as the current valuation appears to encompass the expected positive developments in the A&D sector.
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