A legacy defense company recently got a fresh growth story. UBS analyst Gavin Parsons on September 8 upgraded Lockheed Martin Corporation (NYSE:LMT) to Buy from Neutral.
He also hiked the price target for the stock to $674 from $581, representing a 26% upside from the close that day.
The firm anticipates growth in missiles and munitions to deliver an annual revenue growth rate of 9% through 2028 for the defense contractor. The analyst told investors that this was above consensus estimates and not priced into the stock given its 15% discount to the S&P 500.
UBS described budgetary concerns as exaggerated and expects to see double-digit earnings upside to consensus in 2028, according to TipRanks. The firm is predicting a “material upside” for LMT.
As of the close of business on September 14, LMT is a Moderate Buy based on the recommendations from 14 analysts. It has a one-year average share price target of $629.77, representing an upside of 19%.
Bull Case
UBS’s adjustment comes at a vital moment for the defense industry as countries raise military spending and replenish munition stockpiles amid ongoing conflicts. Analysts are now beginning to view missile production as a durable growth driver rather than a cyclical bump.
Lockheed Martin Corporation’s growth story does not depend on just the F-35 fighter jet, but also other key defense programs and sustainment revenue, which offers diversification.
The argument from UBS about the growth potential from missiles and munitions being ‘not priced in’ holds up against the contractor’s recent beat and raise quarter, and backlog jumping to a record $230 billion, providing UBS’s 9% revenue growth forecast a solid foundation. Another factor that supports the overall bullish thesis for LMT is its forward price-to-earnings ratio of 17.20, which is under the sector median of 19.63, as of September 14, suggesting that the stock is moderately undervalued.
Bear Case
Despite the bullish upgrade from UBS, skeptics argue that the firm’s view that budgetary concerns are overdone is just a judgment. Lockheed remains vulnerable to appropriation fights and shifting political priorities, given the company’s high reliance on defense budgets of the U.S. and its allied partners.
Program execution remains another risk. Growing backlog is not guaranteed to result in margin expansion, and there could be cost overruns. The stock crashed 16% in April after a fall in Q1 profits from production slowdowns and cost pressures.
Efforts to diffuse tensions in the Middle East are ongoing, and a de-escalation with Iran could impact short-term demand for defense contractors. Skeptics may also argue that LMT has returned just over 9% year-to-date as of September 14, which suggests the market has been hesitant about the growth story UBS is betting on.
Hedge Fund Ownership Trends
According to Insider Monkey, hedge fund ownership in Lockheed Martin Corporation declined nearly 10% sequentially from 83 funds in Q1 to 75 funds at the end of the second quarter.
Despite trimming its position by 23%, AQR Capital Management remained the largest stakeholder in the company with shares worth $701 million as of June 30, 2026. Citadel Investment Group was second with holdings of $342 million, while Holocene Advisors had the third-biggest stake valued at nearly $291 million.
Closing Take
The upgrade from UBS signals confidence in Lockheed’s missile-driven growth, but the ‘material upside’ call assumes flawless execution when the company has a history of program misses, which keeps the bear thesis alive.
That said, the valuation and business fundamentals both remain strong, and the overall risk/reward favors the bulls, making LMT a cautious Buy, though investors will be closely watching execution in the coming quarters.
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