Defense Stocks Surge—And SAAB Is Well Positioned
European aerospace and defense companies have enjoyed an unprecedented surge in valuations since the start of the Ukraine conflict. The Morningstar Developed Europe Aerospace & Defense Index has climbed more than 50% in 2025 alone, tripling since Russia’s invasion in 2022.
Among the key beneficiaries is Swedish defense manufacturer SAAB , whose core offerings in air defense systems, radar technologies, and next-gen fighter aircraft have gained significant attention across NATO countries. As defense budgets grow across Europe, SAAB stands out as a strategic supplier well-positioned for long-term demand.
Ceasefire or Escalation—Either Scenario May Support Valuations
While political headlines point to both peace talks and continued escalation, analysts note that either path could strengthen the sector. A potential short-term ceasefire in Ukraine could unlock access for civilian contractors and increase on-the-ground deployment of Western systems—an area where SAAB’s logistical and operational integration expertise gives it a competitive edge.
Conversely, renewed conflict would likely accelerate NATO procurement. Morningstar forecasts $200 billion in additional defense spending across Europe over the next decade, regardless of Ukraine's immediate outcome.
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Why SAAB May Be a Strategic Winner
- Diversified Portfolio : SAAB supplies air defense solutions, anti-ship missiles, and the Gripen fighter jet—many of which are now seeing renewed orders from nations seeking modern, interoperable systems.
- Swedish-NATO Alignment : Sweden’s full integration into NATO enhances SAAB’s relevance as a preferred contractor within the alliance.
- Supply Chain Resilience : Unlike many peers, SAAB retains significant domestic production capacity, aligning with the European push for onshoring critical defense supply chains.
Valuations Still Have Room to Run
Although share prices have surged—Rheinmetall is up 200% YTD, Leonardo 103%, and BAE Systems over 68%—Morningstar analysts have increased their fair value estimates for many leading stocks, citing underappreciated growth in R&D and multinational cooperation frameworks.
SAAB’s valuation remains attractive compared to some continental peers. As capital markets adjust to the permanence of elevated defense budgets, SAAB’s backlog is expected to grow, though it typically involves uncertainties, even in a cooling conflict scenario.
What Could Change the Outlook?
- EU Defense Integration : The new UK–EU security pact offers £150 billion in defense project loans. While primarily benefiting UK firms, SAAB could indirectly profit via subcontracts and pan-European partnerships.
- Tariff Uncertainty : Trump-era protectionist policies and possible tariffs on defense goods could reshape procurement dynamics, potentially favoring intra-European providers like SAAB.
- Technological Edge : The demand for drone tech, low-cost munitions, and integrated battlefield sensors plays into SAAB’s R&D strengths.
Conclusion
SAAB’s strategic profile, NATO alignment, and technology portfolio make it a standout player in Europe's defense rally. Whether conflict continues or a ceasefire materializes, the structural shift in European military policy may provide support to SAAB.
