Lockheed Martin Corporation - Aerospace & Defense

Key arguments in support of the idea.

• Concerns about the F-35 program are exaggerated.
• Trump has proposed deploying a U.S. version of Israel’s "Iron Dome".
• Selloff tends to the end.

Investment Thesis

Concerns about the F-35 program are exaggerated. Both Donald Trump and Elon Musk
have criticized the program in the context of modernizing the U.S. Air Force fleet. Musk
has described the fighter jet as expensive and potentially obsolete. However, the F-35
remains the most technologically advanced fighter jet in production today. NGAD (Next-
Generation Air Dominance) development is delayed, with no clear timeline or certainty
about the production of sixth-generation aircraft. This raises questions about substitute
programs. To our opinion options are limited. The F-22 Raptor, one of the stealthiest
jets, was initially slated for retirement by 2030. However, some officials now expect a
delayed retirement, with modernization efforts by Lockheed Martin (LMT) and RTX
continuing. Production of the F-22 is supposed not to resume. Meanwhile, F-15C/D
Eagle jets are being phased out, requiring replacements. With China advancing its fifthgeneration

J-20 fighters, the U.S. must maintain leadership in air dominance—a role that
other fighter jets cannot currently fulfill. This makes significant changes to the F-35
procurement schedule and volume unlikely. During Trump’s first presidency, similar
criticism of the F-35 did not reduce procurement, and deliveries increased instead. Even
if U.S. Department of Defense orders decrease, the F-35 has strong demand abroad,
especially as the U.S. pressures NATO member countries to allocate up to 5% of GDP to
defense. Should NGAD eventually enter mass production, Lockheed Martin is the most
likely lead, given that Boeing is focused on commercial sector challenges, and Northrop
Grumman has shifted its focus to its B-21 Raider bomber program.

Trump has proposed deploying a U.S. version of Israel’s "Iron Dome“, a unified missile
defense system. Lockheed Martin has extensive experience in this field with its THAAD
(Terminal High Altitude Area Defense) system. THAAD is a highly effective, combatproven
system capable of intercepting short-, medium-, and long-range ballistic
missiles both inside and outside the atmosphere. In March 2022, THAAD demonstrated
successful integration with the PAC-3 MSE missile system. According to the 2025
defense budget, funding for missile defense programs is increasing. Additionally,
Lockheed Martin is advancing its IFPC-HEL (Indirect Fire Protection Capability-High
Energy Laser) program, featuring a 300 kW laser, which could enhance missile defense
capabilities significantly.

Lockheed identifies the Missiles and Fire Control segment as the most promising for
growth through 2027.
Market Perspective

The recent selloff in LMT stock was driven by renewed F-35 criticism from the current
administration. LMT has declined for three consecutive months. However, based on the
points above, LMT appears ready to resume a local bullish trend.
Compared to competitor RTX, which could compete for U.S. missile defense contracts,

LMT is attractively valued:
• Forward P/E (NTM): 17.5x vs. RTX at 19.7x.
• The broader S&P 1500 Aerospace & Defense index has a P/E of 25.9x, making LMT
undervalued.

LMT’s share price is near a wide support range of $460-$490, suggesting limited
downside. A bullish divergence in RSI supports this thesis.

We anticipate LMT’s stock could rise by approximately 13% in the coming months,
reaching $555. A stop-loss can be set at $448.