Key Highlights
- Morgan Stanley executed a double-upgrade on Saab, jumping from “underweight” straight to “overweight” with a SEK 700 price target (up from SEK 540)
- Shares closed at SEK 587.70 on July 6, suggesting approximately 19% upside potential to the revised target
- The bank’s 2030 earnings forecast for Saab exceeds Bloomberg consensus estimates by roughly 30%
- In contrast, Kongsberg received a downgrade to “underweight” from “equal-weight,” with its price target reduced to NOK 330 from NOK 310
- Saab secured a NATO contract to supply GlobalEye surveillance aircraft, replacing the alliance’s fleet of 14 Boeing E-3A aircraft
Morgan Stanley delivered a dramatic shift in its European defense sector coverage Tuesday, executing a complete about-face on Saab while simultaneously cutting its stance on Kongsberg.
The investment bank elevated Saab (SAABb) two full notches to “overweight” from “underweight,” simultaneously boosting its price objective to SEK 700 per share from SEK 540. With shares closing at SEK 587.70 on July 6, the new target implies approximately 19% appreciation potential. The stock climbed roughly 4.9% during Tuesday’s morning session.
Concurrently, Morgan Stanley cut its rating on Norwegian competitor Kongsberg (KOG) to “underweight” from “equal-weight,” while reducing its price objective to NOK 330 from NOK 310. The revised target for Kongsberg offers minimal upside at present trading levels.
The foundation of Morgan Stanley’s bullish thesis on Saab centers on robust order flow. The firm believes Saab possesses a more transparent trajectory toward earnings revisions that haven’t been adequately reflected in current valuations.
Morgan Stanley’s earnings per share projection for Saab in 2030 now stands approximately 30% higher than Bloomberg consensus figures. The bank points to three specific factors it contends the broader market has failed to incorporate.
These three elements include: a restatement within the naval division, a SEK 47 billion submarine contract from Poland finalized on June 29, and a SEK 25 billion Gripen fighter jet order from Ukraine.
Recent contract wins have propelled Morgan Stanley’s estimated order backlog for Saab beyond SEK 300 billion by the second quarter of 2026. Approximately SEK 130 billion of this total stems from confirmed contracts recently secured across multiple platforms including Gripen fighters, GlobalEye surveillance systems, A26 submarines, ground-based air defense systems, Giraffe radars, and NLAW anti-tank weapons.
Substantial Pipeline Extends Beyond Current Orders
Looking beyond secured contracts, Morgan Stanley identified an additional pipeline worth approximately SEK 200 billion in Gripen and GlobalEye opportunities exclusively. The bank noted that even this substantial figure “still understates Saab’s medium-term demand opportunity.”
This represents a remarkably bullish stance from an analyst team that held an underweight rating just one day prior.
The NATO dimension provides additional momentum. The military alliance has selected Saab’s GlobalEye surveillance platform to succeed its aging fleet of 14 Boeing E-3A aircraft. Morgan Stanley indicates this contract remains inadequately captured in current consensus projections.
The Rationale Behind Kongsberg’s Downgrade
The Kongsberg downgrade stems primarily from valuation concerns. Morgan Stanley isn’t expressing pessimism about the company’s underlying business performance, but views the shares as overextended compared to Saab’s opportunity profile at present price levels.
The revised NOK 330 price target for Kongsberg essentially offers zero upside from current trading levels, rendering the risk/reward equation unappealing in Morgan Stanley’s assessment when contrasted with Saab’s 19% potential appreciation.
Kongsberg declined 0.4% on Tuesday as investor focus shifted toward Saab’s momentum.
Morgan Stanley characterized Saab as presenting “clearer upgrade risk from strong order momentum not yet reflected in consensus, alongside a year-to-date derating” ā highlighting an entry opportunity that has become more compelling following Saab’s relative weakness during the year’s earlier months.
The SEK 47 billion Polish submarine deal and the Ukrainian Gripen contract stood out as the most immediate catalysts referenced in the research note, both secured within the preceding two-week period.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
