The rise in global defence spending has massively boosted BAE Systems (LSE: BAE) shares. As governments around the world reallocate billions into their militaries in the light of rising conflicts, companies like BAE that can provide state-of-the-art military technology are set to reap the rewards. An increase in orders for its hardware has already pushed the firm into the top 20 FTSE 100 companies by market cap – and that could just be the start!
Now, the extra spending has created an order backlog in the many tens of billions, and had analysts busily updating their future projections for the stock. Here is where they think the BAE Systems share price could be in December 2026.
Price targets
There are nearly two dozen analysts covering BAE Systems shares at present and there is a pretty clear consensus: buy, buy, buy! Of the 21 analysts covering the stock, 15 having it down as a Buy or Outperform. And that’s a number that keeps rising.
The average price target for the next 12 months is 2,150p. Comparing that to the current share price of 1,689p, this share price forecast offers a possible 24.5% return.
A Fool who buys a £1,000 stake today could see it turn into £1,245 in a year’s time. There would be a few dividend payments on top too.
The highest price target on Europe’s biggest defence contractor is a whopping 2,500p. Representing a massive 44.8% increase on the current share price, that £1,000 stake here could turn into £1,448 in just 12 months. Again, that’s without even bringing dividends into the picture.
It’s worth pointing out here that though analysts study stocks and companies in great detail, their predictions are not close to being guaranteed. Even the best analyst, like every investor there ever was, will get it wrong from time to time.
Issues
As bullish as the analysts are, there are threats to the BAE Systems share price. Chief among them, perhaps, is the role of ongoing wars in defence spending.
Should the world become more peaceful, then this will likely hurt orders. And it does seem that some of the larger conflicts are (hopefully) coming to an end.
This brings up another issue many may have with such a stock. The earnings are driven by the sale of weapons and the like. While some may point out that companies like this provide the kind of effective deterrent that prevents wars from happening, I wouldn’t blame anyone who feels uncomfortable about investing here.
The last word? As 2026 approaches, it’s natural for us Foolsih folks to tinker with our portfolios. As ever, the new year will bring many chances to get rich on the stock market. I’d say BAE Systems should be considered among them.
