Why These Defense Stocks Are Declining This Week

This article looks at defense stocks that are declining this week.

Defense stocks were volatile last month. Shares fell sharply on February 13 after the American president suggested his country could rapidly cut military spending in the future. Trump made these comments in the context of a potential future conference with China and Russia to discuss cutting defense expenditure to spend the money in other areas.

READ ALSO: 10 Best Gun Stocks to Buy in 2025 and 10 Best Large Cap Defense Stocks to Buy Now.

Trump has also vowed to end the tumultuous wars in the Middle East and Europe. The U.S. is actively engaging key players in the Middle East for an extension of the truce in Gaza. On February 17, American and Russian officials met in Saudi Arabia to discuss ending the Ukraine war.

Some analysts view his anti-war stance as detrimental to defense stocks. The creation of the Department of Government Efficiency (DOGE), which aims to reduce wasteful spending, cut unnecessary regulations, and restructure federal agencies, is also reshaping investors’ views of the sector.

Byron Callan, managing partner at Capital Alpha Partners, believes there is a high level of uncertainty in the U.S. defense sector related to current and future programs and the likelihood of severe cuts to government workforces.

According to a Financial Times report, shares of the six largest American defense companies have fallen 4% since Trump’s return to the White House. In contrast, Europe’s top defense stocks have risen by nearly 40% over the same period. While the performance of the U.S. defense sector was lagging behind Europe and Asia well before the presidential elections, the gap has widened after Trump’s victory.

Globally, defense stocks have rallied over the past two weeks as European governments faced pressures to increase military expenditure. The momentum has further picked up after a conservative victory in Germany, signaling the shift to the right in Berlin. According to a Bloomberg report, Friedrich Merz, the country’s chancellor-in-waiting, has already opened talks between the Christian Democrats and Social Democrats over a $210 billion emergency defense fund.

While some US defense stocks have benefited from the wave, there are several that have missed out and continue to slide.

Let’s now head over to the list of defense stocks that are declining this week. Please note that the stocks listed are based on one week’s performance. Our analysis does not reflect the prospects of the company. Their share price could go high or low in the future, depending on the external market conditions, industry-specific challenges, and the company’s capabilities. Additional research and caution are advised before making investment decisions.

Our Methodology:

For this article, we went through screeners to see how stocks in the aerospace and defense industry performed over the past week (February 24-28). From there, we picked the top 10 stocks with the highest percentage decline in share price during this period. All data is as of the close of business on Friday, February 28, 2025.

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10. Byrna Technologies Inc. (NASDAQ:BYRN)

Weekly Decline: -9.75%

Byrna Technologies Inc. (NASDAQ:BYRN) manufactures less-lethal equipment and munitions for personal security, private security firms, military, and law enforcement agencies.

The stock has had impressive returns of 129% in the last 6 months, as it benefits from high brand visibility through increased media exposure. This is helping in boosting consumer and law enforcement demand for its products. During the Q4 2024 earnings call on February 5, Byrna Technologies Inc. (NASDAQ:BYRN) reported a 101% increase in net revenue for the fiscal year. Net income also improved to $12.8 million from a net loss of $8.2 million in fiscal 2023.

Over the past week, Byrna Technologies Inc. (NASDAQ:BYRN)’s share price has declined by 9.75%. While there is no conclusive reason for the dip, it may have been sparked by overvaluation concerns among investors, given its high P/E ratio. Last week, BYRN’s top executives were also reported to have sold shares of the company. However, those transactions were part of a 10b5-1 pre-established trading plan.

9. Innovative Solutions and Support, Inc. (NASDAQ:ISSC)

Weekly Decline: -9.85%

Innovative Solutions and Support, Inc. (NASDAQ:ISSC) manufactures and sells advanced avionic solutions to a broad customer base, spanning commercial, military, and business and aviation markets. It is among the defense stocks that are declining this week.

As of February 28, ISSC had fallen 36% over the past month, with a major dip in the run up to and following the earnings call for the first quarter of fiscal 2025 on January 29. The slide continued throughout last week, with a 9.85% decline.

Innovative Solutions and Support, Inc. (NASDAQ:ISSC) reported net revenues of $16 million during the first quarter, representing a 70% year-over-year growth, driven by momentum from new military programs. However, gross margins were down from 59.3% last year to 41.4% during the recent quarter, due to incremental depreciation from recent product line acquisitions. Net income for Q1 stood at $700,000 or $0.04 a share. This not only missed estimates, but was also down from $1.1 million, or $0.06 per share a year ago.

8. Rocket Lab USA, Inc. (NASDAQ:RKLB)

Weekly Decline: -13.01%

Rocket Lab USA, Inc. (NASDAQ:RKLB) is an end-to-end space company delivering reliable launch services, spacecraft components, spacecraft design services, and related software to support the space economy.  It is also working on several defense contracts. Recently the company was selected by Kratos to deliver hypersonic test launches for the Department of Defense (DoD).

The stock tumbled by over 13% last week after a short report by Bleecker Street Research warned that Rocket Lab USA, Inc. (NASDAQ:RKLB) had misled investors about the launch of its highly anticipated Neutron rocket in mid-2025.

However, during Rocket Lab USA, Inc. (NASDAQ:RKLB)’s Q4 2024 earnings call on February 28, the company stated it was making good progress on the Neutron project and reaffirmed that the rocket remains planned for a 2025 launch. The announcement resulted in a 3.33% appreciation in share price, but was not enough to keep RKLB off the list of defense stocks that are declining this week.

7. Satellogic Inc. (NASDAQ:SATL)

Weekly Decline: -13.92%

Satellogic Inc. (NASDAQ:SATL) is a vertically integrated geospatial analytics company that delivers real-time insights for consumers, governments, and industries worldwide. The stock has had a stellar run over the last six months, with its share price surging by 209%, at the back of notable contract awards.

In September last year, Satellogic Inc. (NASDAQ:SATL) was selected as one of the eight recipients of NASA’s Commercial SmallSat Data Acquisition Program On-Ramp1 Multiple Award contract, under which the company will provide NASA with high-resolution multispectral imagery until November 2028.

On February 6, Satellogic Inc. (NASDAQ:SATL) and Telespazio Brasil signed a multi-year agreement with Brazil’s Air Force to provide low-latency satellite imagery for security operations within the country’s territory. The company’s shares rose 11% that day and made further gains over the next two days that followed.

Satellogic Inc. (NASDAQ:SATL)’s share price has now gradually dropped and returned to the levels it was trading on before the deal. The near 14% dip over the last week is likely to be a result of market correction, amid perception of the stock being overvalued.

6. Sidus Space, Inc. (NASDAQ:SIDU)

Weekly Decline: -21.25%

Sidus Space, Inc. (NASDAQ:SIDU) is engaged in the design, manufacture, launch, and data collection of commercial satellites. It serves aerospace, commercial space, and defense industries. The company’s share price has plummeted 61% in 2025, and was down by 21.25% last week.

Weak financial position is one of the major drivers of the stock’s poor performance. Sidus Space, Inc. (NASDAQ:SIDU) reported a net loss of $14.3 million for fiscal 2023, which was up from $12.8 million in the prior year. The company has continued to make losses during the first three quarters of fiscal 2024.

While a 90% year-over-year increase in revenue in Q3 2024 did raise a glimmer of hope for recovery, investors remain concerned about the company’s weak gross profit margins, which stood at just 2% during the third quarter – the most recent declared results.

5. Redwire Corporation (NYSE:RDW)

Weekly Decline: -22.00%

Redwire Corporation (NYSE:RDW) is a global space company, providing critical space infrastructure for government and commercial users. In January this year, the company expanded into defense with a $925 million acquisition of drone maker, Edge Autonomy.

However, the stock has fallen 37% over the past month, amid reports of ongoing investigations from law firms to ascertain whether the acquisition was fair to shareholders. Last week, the share price dipped 22%, dropping nearly $400 million in market capitalization.

A former attorney general of Louisiana and Kahn Swick & Foti, LLC are investigating the terms of the agreement. Halper Sadeh LLC, an investor rights law firm, is also inquiring into the merger.

According to a report on Investing.com, Genesis Park II LP, a major stakeholder in the company, sold $26.9 million worth of Redwire Corporation (NYSE:RDW) shares on February 25.

4. KWESST Micro Systems Inc. (NASDAQ:KWE)

Weekly Decline: -24.78%

KWESST Micro Systems Inc. (NASDAQ:KWE) is engaged in the development of tactical systems and ammunition for military and security forces.

The company’s share price was up 13.70% during the week of February 17 after positive recent developments, amid improved financial results for the first quarter of fiscal 2025 and the closing of the first tranche of its CAD$3.5 million private placement. However, the gains were reversed last week after the shares fell by nearly 25%.

While there was no apparent event that triggered the dip last week, the stock has been declining in 2025, with a year-to-date drop of nearly 40%. A likely reason behind this is KWESST Micro Systems Inc. (NASDAQ:KWE) running against time to regain compliance with NASDAQ’s minimum $1 per share price requirement.

In November last year, NASDAQ extended KWE’s listing for another 180 days, giving the company until May 12, 2025, to regain compliance. KWESST Micro Systems Inc. (NASDAQ:KWE) was trading at $0.4301 as of the close of business on February 28.

3. Nauticus Robotics, Inc. (NASDAQ:KITT)

Weekly Decline: -25.35%

Nauticus Robotics, Inc. (NASDAQ:KITT) develops autonomous robots for the ocean industry. It is also a key player in the defense sector. In January this year, the company forged a strategic alliance with Leidos to advance subsea autonomy solutions.

The stock is down 92% over the past year and continued to fall throughout last week, with a decline of 25.35%. Nauticus Robotics, Inc. (NASDAQ:KITT) has been pressured by NASDAQ compliance requirements, with warnings of delisting.

Nauticus Robotics, Inc. (NASDAQ:KITT) is also facing significant financial challenges. During the third quarter of fiscal 2024, it reported a revenue of $0.4 million, down from $1.6 million for the prior year’s period. Net loss was recorded at $11.4 million, up by $6 million sequentially.

2. Momentus Inc. (NASDAQ:MNTS)

Weekly Decline: -25.49%

Momentus Inc. (NASDAQ:MNTS) is a commercial space company that offers satellite buses and in-space infrastructure services, including hosted payloads, in-space transportation, and other in-orbit services. It is also a recipient of several space-related defense contracts.

The company is among defense stocks that are declining this week. Its share price continued to slump, falling by 25.49%, much like it has done over the past year. Momentus Inc. (NASDAQ:MNTS) has been under pressure for a year after receiving several delisting warnings from NASDAQ due to its low share price. The company has also been sent deficiency notices over the delayed filing of its Form 10-K.

On January 16, NASDAQ granted Momentus Inc. (NASDAQ:MNTS)’s request to continue its listing until April 15 while it executes plans to regain compliance with the stock exchange’s listing rules. It must be noted that the company has regained compliance with the requirement to have a minimum bid price of $1 per share.

1. ParaZero Technologies Ltd. (NASDAQ:PRZO)

Weekly Decline: -29.05%

ParaZero Technologies Ltd. (NASDAQ:PRZO) is an Israel-based aerospace company that provides safety systems for defense Counter UAS systems and commercial unmanned aircraft.

In December, the company regained NASDAQ compliance for the minimum bid price requirement for listing on the stock exchange. However, its share price has again dropped below the $1 mark.

On February 11, ParaZero Technologies Ltd. (NASDAQ:PRZO) declared preliminary unaudited results for fiscal 2024. While it expects revenue to increase 45% year-over-year to $900,000, the company’s liquidity position appears to be weakening. As of December 31, 2024, PRZO had cash and cash equivalents of $4.2 million, compared to $7.4 million at the close of 2023.

ParaZero Technologies Ltd. (NASDAQ:PRZO) has fallen by 51% over the past month, with its share price dropping by more than 29% last week. As a result, it tops our list of defense stocks that are declining this week.

Overall, ParaZero Technologies Ltd. (NASDAQ:PRZO) ranks first among the Defense Stocks That Are Declining This Week. While we acknowledge the potential of defense companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PRZO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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