Rheinmetall share price has had a strong performance this year, and numerous tailwinds may push it higher in the coming months. The RHM stock was trading at €1,880 on Monday, a few points below the year-to-date high of €1,939, and 585% above its lowest point in 2024.
Donald Trump commits to Ukraine war
The Rheinmetall stock price rose on Monday as investors reacted to a Donald Trump statement on the Ukrainian war. In a statement, he said that the US would provide Ukraine with weapons as talks with Russia drags on.
Trump also threatened to impose huge secondary tariffs on countries buying Russian products. At the same time, Trump recently signed into law the Big Beautiful Bill that provides more funding to companies in the military-industrial complex.
Most importantly, Trump has pushed NATO member countries to boost their defense spending to 5% of their GDP. Such a move, if implemented, would be highly beneficial to Rheinmetall, one of Europe’s biggest defense contractors.
The statement came at a time when most NATO members were boosting their defense budgets. Germany, one of the most conservative states, voted for a big €500 billion spending package earlier this year.
Still, it is unclear whether countries will get to the 5% target any time soon, since many of them have failed to hit the previous 2%.
RHM business is doing well
These developments are happening at a time when Rheinmetall’s business was doing well as its sales experienced double-digit gains, which explains why it is one of the best-performing DAX Index constituents.
The most recent results showed that Rheinmetall’s business continued firing on all cylinders in the first quarter. Its sales surged by 46% to €2.3 billion, with its defense segment jumping by 73% during that time.
Rheinmetall’s operating margins rose to 8.7% during the quarter, while its profit soared by 49% to €134 million. These numbers indicate that the company, established in 1889, has experienced renewed growth.
The company is also challenging some of the biggest American defense contractors that have dominated the industry in the past few years. For example, it ended the last quarter with a backlog of over €63 billion or $73 billion.
That backlog matches that of General Dynamics and is much higher than that of L3Harris, and is closing the gap with BAE Systems.
The next catalyst for the Rheinmetall share price will be the upcoming earnings on August 7. These numbers will provide more information about its business and its order flow.
The main concern about Rheinmetall is that it has become highly overvalued as it has price-to-earnings ratio has surged to 112. This is a much higher figure than its 2024 level of 23.
Rheinmetall share price analysis
The daily chart shows that the Rheinmetall stock price has surged in the past few months. It surged from a low of €433 in August last year to a record high of €1,940. This surge happened after the company experienced substantial tailwinds in the defence industry.
Rheinmetall share price has remained above the 50-day and 100-day Exponential Moving Averages (EMA). Most importantly, the stock has formed a bullish pennant pattern.
This pattern forms when an asset has a flagpole and a symmetrical triangle pattern. The two lines of this triangle are nearing their confluence. Also, the Relative Strength Index (RSI) and the MACD have formed a bullish continuation pattern.
Therefore, while overvalued, there is a likelihood that the stock will keep rising as bulls target the all-time high of €1,940. A move above that level will push it to the psychological point at €2,000.
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