Rheinmetall’s Bounce Faces a Proving Ground as Berlin’s Legislative Push Collides with Project Risk

The defence group’s stock clawed back above €1,050 on Wednesday after the German cabinet approved two bills intended to accelerate military infrastructure and bolster the reserve force. The legislation, passed on 1 July 2026, aims to cut red tape and boost readiness, providing a clear political signal that Germany’s rearmament trajectory remains intact despite recent project cancellations.

Yet the rally — which lifted shares to a closing price of €1,054.80 — still sits 47.13% below the 52-week high of €1,995 touched in late September last year. The move higher was driven by sentiment rather than any new order from Berlin. “The cabinet decision does not name Rheinmetall directly, and no contract was signed,” one trader noted. “This is a bet on future procurement, not a guarantee of it.”

That bet comes just days after the defence ministry pulled the plug on the F126 frigate project in its original form, sending the stock to a fresh 2026 low of €902.50 on 25 June. The cancellation reportedly stemmed from cost overruns that would have swelled the programme from an initial €10 billion to €18.8 billion. The episode has jolted investors into focusing on execution risk: even a backlog of €73 billion does not guarantee that Rheinmetall can convert it into profitable revenue without triggering margin compression.

The share price has now recovered 16.88% from that trough, though it remains 12.82% below its 50-day moving average of €1,209.84 and 31.83% below the 200-day line. The relative strength index stands at 41.3, suggesting the stock is not overbought after the slide, but the chart pattern remains fragile. The annualised volatility of 67.87% underscores how quickly a fresh setback could undo the gains.

Should investors sell immediately? Or is it worth buying Rheinmetall?

One solid pillar is the ammunition business, where Rheinmetall holds a near-monopoly in Europe for 155mm artillery shells. The company booked another Ukraine contract in the high double-digit millions of euros in the second quarter of 2026, with completion expected by the first quarter of 2027. Production is already under way at the Rheinmetall Expal Munitions facility in Spain. The group is pushing capacity to 1.1 million shells annually by 2027 and ultimately 1.5 million by 2030, a ramp-up that should underpin organic growth even if large platform programmes stall.

The biggest headwind remains the politics of defence budgets. The MGCS Franco-German tank programme is facing fresh uncertainty over future budget allocations that could stretch its timeline into the 2040s. Germany’s Bundestag budget committee retains the final say on all major procurements, and the F126 example shows that no project is safe until financing is formally locked in.

Investors will look for tangible progress at the NATO Defence Industry Forum in Ankara on 7 July, where new multilateral procurement initiatives could take shape. A clearer test arrives with the half-year report on 6 August, when Rheinmetall must show that improving margins in the ammunition division are supporting the full-year outlook. If the numbers disappoint or if further projects falter on cost grounds, the €902.50 low will come back into focus. For now, the stock is holding above the psychologically important €1,000 mark — a level that could attract institutional buyers betting on a normalisation of valuations after the steep sell-off.