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Would you invest in Thales if its profits come from war?


What’s interesting about Thales is that the Ukrainian war has been a massive catalyst for its share price


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1Q22 Earnings results were disappointing

2/3rds of revenue from defense

Mainly selling in Europe

Defense companies benefit from war

  • Major defense contractors saw a surge in share price while the overall NYSE declined
    • Thales has been among the biggest winners so far

Ukrainian war constituted catalyst for Thales

  • The share price mainly remained flat until the war started
    • Investors adjusted their expectations upward almost immediately

Thales likely to benefit from increase in gov’t spending

  • In response to the war, France announced to increase its defense budget
    • Currently, it is around 2% of GDP, in line with the NATO requirement
    • This number could go up to 2.5% as France plays an increasingly dominant role in Europe

Is it ethical as an investor to profit from war?

Is it ethical as an investor to profit from war?

Is it ethical as an investor to profit from war?

  • Sample of 2,058 Interactive Investor website visitors between the 9 and 10 March 2022
  • The UK’s second-largest direct to consumer investment platform.
  • 42% of respondents believe that the Russia-Ukraine war and the potential escalation of the conflict represent the biggest threat to global stock markets over the next five years, ahead of inflation (23%) and geo-political tensions involving China, Brazil, the Middle East and more broadly (20%).
  • Meanwhile, 7% of respondents cited climate change – five months on from COP26, the UN climate conference held in Glasgow last year.

 

How does consensus assess Thales?

  • With the share price rally, some analysts downgraded to a HOLD recommendation
  • Over the past 4 months, analysts constantly increased their target price
    • Currently, analysts only see a small upside of 13% left

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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.