Where can the BAE Systems share price go in 2025? Let’s ask the experts

The BAE Systems share price has had a strong year in 2024, but it’s started slipping back a bit as we get close to the New Year.

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BAE Systems (LSE: BA.) has been in the shadow of Rolls-Royce Holdings in 2024, with its share price falling back since November.

It’s up 5% year to date, but a 94% gain for Rolls-Royce puts it firmly in the shade.

We’re looking at a 140% rise for BAE shares in the past five years, so it’s still been a big success story since the 2020 stock market crash.

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Created with Highcharts 11.4.3BAE Systems PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

What next?

BAE will deliver full-year 2024 results on 19 February. And judging by November’s trading statement, things are on track.

CEO Charles Woodburn said “Our operational and financial performance so far in 2024 reaffirms our confidence in achieving the upgraded full year guidance we issued at the half year“.

That guidance suggests a 14% rise in sales, with underlying EBIT also up 14%. Earnings per share (EPS) should see a 9% increase. And the company upped its cash flow guidance by £200m to more than £1.5bn.

The BAE board said it expects “over £6.0bn of free cash flow for the three year period ending 2024“. All round, it sounds like a pretty good year.

Bullish brokers

Through 2024, analysts have been issuing a stream of Buy recommendations. On 10 December, Berenberg Bank reiterated its Buy stance, and upped the price target to 1,440p.

That would mean a 23% rise from the 1,168p at the time of writing (19 December).

Back in July, JP Morgan Cazenove had a 1,500p target, for a 28% boost. And that was a week before BAE raised its full-year outlook at interim time.

It’s hard to find a City analyst who’s negative on BAE, with only two out of 17 that I can see expecting underperformance.

Consensus

Broker recommendations and price targets have to be treated carefully. It seems to me that they’re more likely to err on the positive than the negative side when faced with uncertainty.

But comparing their current range of projections for BAE with Rolls-Royce shows a marked difference in confidence.

We’re looking at a price target range of 1,180p to 1,670p for BAE. Those are all positive, with even the bottom end of the range just ahead of the current price.

But targets for Rolls range from 240p to 850p. The most optimistic thinks we could see a 45% climb on top of the 2024 gains we’ve already had. But at least one of them fears a fall of almost 60%.

Dangers ahead

Why the recent BAE share price weakness? It seems like there are fears of US defence spending cuts when the new administration takes over.

I also think we could be seeing shareholder negativity on two fronts. I expect some will see a forecast price-to-earnings (P/E) of around 18 as high enough, and will be taking profits.

And I reckon income investors won’t rate a forecast 2.6% dividend yield as anything to shout about, not when there are so many bigger ones on the FTSE 100.

But for me, it’s one I’m considering as I have no exposure to this sector. And I think BAE carries less risk than Rolls-Royce right now.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended BAE Systems and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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