This Could Be a Big Catalyst for LMT Stock
Lockheed Martin Corporation (NYSE:LMT) continues to trade in the $220.00 range, but LMT stock has all the cards to perform higher, reaching new records of $250.00 and higher in the wake of the Paris terrorist attacks of November 13. Lockheed Martin, perhaps the world’s largest defense stock, has already gained increased visibility as western governments scramble to respond to the Paris attacks.
Lockheed Martin stock was one of the top performers on the New York Stock Exchange and the highest in the defense sector on the first day of trading after the Paris attacks. The company is poised to benefit from the escalation of raids over Syria and Iraq planned by the North Atlantic Treaty Organization (NATO) coalition. Inevitably, European Union (EU) governments will increase military spending following the example of the United States.
Defense Stocks Printing Money
Companies like Finmeccanica, which makes defense systems, helicopters, and naval and air ammunition, gained 2.7% in Milan, while Thales, the manufacturer of radar and defense systems, gained 3.3% in Paris. BAE Systems and MTU Aero Engines also topped the European charts. In this context, for the next few weeks, tourism stocks, such as airlines, could suffer, while defense and aerospace stocks should see solid momentum.
As evidence of Lockheed Martin stock’s strength, the defense contractor announced that it has signed a multi-year contract with D-Wave Systems, the only manufacturer of quantum computers, to upgrade LMT’s 512-qubit D-Wave Two quantum computer to the new D-Wave 2X system with 1,000+ qubits. Lockheed Martin was the first to order a D-Wave quantum computer in 2011. (Source: “D-Wave Systems Announces Multi-Year Agreement with Lockheed Martin,” CNN Money, November 16, 2015.)
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“Our mission is to solve complex challenges, advance scientific discovery and deliver innovative solutions to our customers, which requires expertise in the most advanced technologies,” said Greg Tallant, Lockheed Martin fellow and lead for the University of Southern California Lockheed Martin Quantum Computation Center (QCC). (Source: Ibid.)
France has promised a relentless and “remorseless” war against those responsible, while the Islamic State has boasted it is ready to attack Washington. The climate is ripe for dealers selling weapons—the more sophisticated, the better—and the overall geopolitical context suggests the whole world will witness an intensified arms race in response to the Paris attacks.
In this scenario, the United States and Russia will continue to intensify their arms race. The U.S. is focusing on the sale of drones, opening the market to the United Kingdom and other EU air forces of the “Reaper MQ-9” drone, known for having aided in the targeting and killing of the infamous “Jihadi John,” an IS terrorist. (Source: “The technology behind the MQ-9 Reaper that led to the execution of Jihadi John,” The Mirror, November 13, 2015.) Washington also could soon exploit the fears caused by the rearmament of Iran by selling the Lockheed Martin “F-35” to other Gulf powers.
After suffering various setbacks, on November 9, Russia signed an $800-million contract to deliver “S-300” anti-aircraft missiles to Iran. Rostec, the company that makes these missiles, said the first batch of missiles will be delivered within 18 months from the moment Tehran announces which specific variant of the S-300 it will order. (Source: “Russia and Iran Sign Long-Awaited S-300 Contract,” The Moscow Times, November 9, 2015.)
In 2010, former Russian president Dmitri Medvedev suspended the contract, originally reached in 2007, in accordance with UN Resolution 1929, passed in response to the Iranian nuclear program. The breakthrough came last April, when the agreement on the Iranian nuclear program prompted the current Russian president, Vladimir Putin, to reconsider the suspension.
The entry into the contract consolidates the Moscow-Tehran axis, generating a domino effect in Israel and Saudi Arabia, Iran’s main opponents in the Middle East and the Gulf. Washington will be under pressure to allow sales of comparable missile systems, as Tel Aviv and Riyadh see the S-300s as a deterrent against air strikes, presumably launched to ambush the Iranian nuclear program in case the system of checks and balances envisaged by the Geneva agreement should fail.
The S-300s are fully automated anti-aircraft missiles, requiring just minutes to deploy. They come with the capability to track 100 aircraft and missiles via radar, while targeting up to 26 targets contemporarily. The “S-300B4” variant, which is available for Iran to buy, can hit targets located as much as 240 miles away. Iran could deploy the S-300 in the Persian Gulf, an area from which these missiles can focus on targets (or threats) located in Kuwait, the United Arab Emirates, Saudi Arabia, and Qatar.
The Saudis have asked Moscow to rescind its rocket deliveries to Iran; however, the Russians have responded that, given what is happening in Syria and Iraq, where Iran is on the frontline to defend the regime in Damascus, Iran has legitimate defense needs.
Here’s the Bottom Line on LMT Stock
Meanwhile, Lockheed Martin stock could also rise, as the S-300 will highlight the fact that it has a $780-million contract in the area of ballistic missile defense , the same category as the Russian S-300. In late October, Lockheed Martin announced it will “develop, build and test” a new long-range discrimination radar (LRDR) system for the U.S. Missile Defense Agency. (Source: “Lockheed Wins $784M Long-Range Radar Contract,” DefenseNews, October 22, 2015.)
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