Lockheed Stock Has 40% Upside, Analyst Says. Is the Worst Over for Defense? — Barrons.com

What happened

Morgan Stanley analyst Kristine Liwag upgraded Lockheed Martin shares to Buy from Hold and raised her price target to $835 from $690. That target implies a gain of almost 40% from recent levels, and Lockheed stock rose 1.7% to $614.16 in premarket trading.

Confirmed

Global impact / market context

An upgrade from a major brokerage can draw new buyers into a stock, and the higher target signals the analyst expects Lockheed shares to recover. Because the F-35 fighter jet brings in about 25% of Lockheed's total revenue, keeping production steady protects a large share of company sales.

Analyst inference

Defense stocks have struggled recently, so this upgrade suggests investors may be reassessing the sector. A framework agreement to keep F-35 production at 156 per year reduces uncertainty about future revenue, while growth in missiles and partnerships with newer defense tech players like Hadrian address worries about losing market share to start-ups.

Analyst inference

What to watch

1. The F-35 program accounts for an estimated 25% of Lockheed's total revenue, so any change to production or orders for this fighter jet would matter greatly to the company's sales. Confirmed
2. Watch whether Lockheed's missile and fire control business delivers the mid-teens percentage growth the analyst expects, because faster missile production would support revenue and help justify the higher price target. Proposed
3. Watch whether the framework agreement with the Department of War turns into firm orders that keep F-35 production at 156 jets per year, since that is the main reason cited for reduced risk in the stock. Analyst inference

Evidence

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