SAAB: Fair Value Estimate Raised as European Defense Spending Expected to Exceed 3% of GDP

After recently raising our fair value estimate in anticipation of European defense spending exceeding NATO’s 2% target, we are revising our projections upward. Given recent developments, including escalating discussions about a potential US pullback and increasing pressure from Washington, D.C., for Europe to boost its defense budgets, we now expect European defense spending to reach 3.1% of GDP by 2029, up from 2.4%, and 3.5% by 2032 (previously 2.8%). As a result, we are raising wide-moat SAAB’s fair value estimate to SEK 371. SAAB is well positioned to capitalize on growing European defense budgets, strengthening its role in Nordic and Baltic Sea defense. Germany, where SAAB has a strong presence in electronic systems, presents another key opportunity, especially as it is expected to take on a larger defense role if US support declines.