Key insights
- The author argues that Lockheed Martin and Boeing face significant headwinds due to increasing competition from SpaceX in government space contracts. Loss of market share in national security launches and negative operating margins on fixed-price contracts are key concerns. While Lockheed's F-35 program provides some stability, the author believes the current valuation doesn't reflect the competitive threat from SpaceX.
LMT is down 35% and I think its going to get worse.The bull case I keep hearing is "defense spending is up, geopolitical risk is elevated, LMT is cheap on P/E." All true. But that ignores the real problem. They're losing the actual launch business. Phase 3 NSSL handed SpaceX 60% of national security launches. ULA is cooked. And that was before SpaceX had a public stock and an acquisition war chest.
Boeing defense is somehow worse. Still running negative operating margins on fixed-price contracts they should never have signed. NASA just cut them from the Artemis lunar role.
I get that Lockheed has F-35 and missile defense and that's not going away. But the valuation still feels like it's pricing in a world where they have no serious competition for government space contracts. That world ended a few years years ago.
Curious if anyone here is long LMT right now and what the thesis is. Are you not worried about them losing contracts?
Analysis that lays out the full competitive picture pretty well: bigmarketreport.com/analysis/boeing-lockheed-after-spacex)