Key Takeaways
- Morgan Stanley executed a rare double-upgrade on Saab, shifting from “underweight” to “overweight” and boosting its price target to SEK 700 from SEK 540
- With Saab trading at SEK 587.70 as of July 6, the revised target suggests potential upside of approximately 19%
- The investment bank’s 2030 earnings per share projection 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
- NATO’s commitment to acquire Saab’s GlobalEye surveillance systems as replacements for its fleet of 14 Boeing E-3A aircraft
Morgan Stanley delivered a dramatic shift in its European defense sector outlook Tuesday, completely reversing course on Saab while simultaneously cutting its stance on Kongsberg in a single research report.
The Wall Street investment bank elevated Saab (SAABb) by two notches to “overweight” from “underweight,” simultaneously increasing its price objective to SEK 700 per share from the previous SEK 540. With Saab’s shares closing at SEK 587.70 on July 6, the updated target implies potential gains of approximately 19%. The defense contractor’s shares climbed roughly 4.9% in Tuesday’s morning session.
Concurrently, Morgan Stanley lowered its rating on Norwegian competitor Kongsberg (KOG) to “underweight” from “equal-weight,” reducing the price target to NOK 330 from NOK 310. The revised Kongsberg target suggests minimal upside potential from current trading levels.
The centerpiece of Morgan Stanley’s bullish thesis on Saab revolves around order flow acceleration. The firm contends that Saab possesses a more transparent trajectory toward earnings revisions that market participants have yet to fully incorporate into valuations.
Morgan Stanley’s earnings per share forecast for Saab extending to 2030 now exceeds Bloomberg consensus projections by approximately 30%. The bank credits this differential to three specific catalysts that it believes the broader analyst community has not adequately factored into their models.
These three drivers include: a naval division financial restatement, a SEK 47 billion submarine contract from Poland finalized on June 29, and a SEK 25 billion Gripen fighter jet order from Ukraine.
With recent contract wins converting to firm orders, Morgan Stanley’s estimated backlog for Saab is projected to exceed SEK 300 billion by the second quarter of 2026. Approximately SEK 130 billion of this total stems from confirmed contracts recently secured across multiple product lines including Gripen fighters, GlobalEye surveillance platforms, A26 submarines, ground-based air defense systems, Giraffe radar, and NLAW anti-tank weapons.
The Opportunity Extends Far Beyond Current Orders
Looking beyond existing contracts, Morgan Stanley identified an additional opportunity pipeline valued at roughly SEK 200 billion in Gripen and GlobalEye programs exclusively. The firm noted that even this substantial figure “still understates Saab’s medium-term demand opportunity.”
This represents notably bullish commentary from an analyst team that held an underweight rating on the stock just 24 hours earlier.
The NATO dimension adds meaningful strategic value. The military alliance has committed to procuring Saab’s GlobalEye airborne early warning and control aircraft to replace its aging fleet of 14 Boeing E-3A AWACS planes. Morgan Stanley indicates that this contract has not been completely incorporated into consensus analyst forecasts.
The Case Against Kongsberg
The Kongsberg downgrade centers primarily on valuation concerns. Morgan Stanley maintains a constructive view of the company’s operational performance but considers the stock price excessive relative to Saab’s growth prospects at present valuations.
The revised NOK 330 price objective for Kongsberg offers virtually no appreciation potential from current levels, rendering the risk/reward profile less compelling in Morgan Stanley’s assessment when compared to Saab’s 19% potential upside.
Kongsberg shares declined 0.4% on Tuesday as investor attention shifted toward Saab’s gains.
Morgan Stanley characterized Saab as presenting “clearer upgrade risk from strong order momentum not yet reflected in consensus, alongside a year-to-date derating” — suggesting an entry opportunity that has become more favorable following Saab’s relative underperformance during the first half of the year.
The SEK 47 billion Polish submarine agreement and the Ukrainian Gripen contract served as the most immediate catalysts referenced in the research note, both secured within the preceding two-week period.
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