Al Root

Lockheed Martin stock is " disliked" by long-term investors. That could change in 2026, according to one Wall Street analyst.

"We think Lockheed Martin [stock] is attractive, and investors have a good entry point," wrote Seaport analyst Richard Safran on Sunday. "We think risk/reward has improved, but investors disagree and keep Lockheed in the penalty box."

The expression is apt. Coming into Monday trading, Lockheed Martin stock was down about 4% year to date and off about 13% over the past 12 months. That is sharply divergent from other aerospace and defense stocks. The iShares U.S. Aerospace & Defense ETF was up approximately 42% year to date and had risen approximately 37% over the past 12 months.

Lockheed stock trades for about 16 times the per-share earnings expected for 2026. Other large defense contractors trade for about 22 times, in line with the S&P 500.

Investors have been encouraged by the outlook for higher military spending in the U.S. and Europe. Lockheed, however, has faced concerns that demand for its F-35 fighter jet could fall in the coming years. The F-35 brings in the majority of the revenue in Lockheed's Aeronautics segment, which had about $7.1 billion in third-quarter sales, or almost 40% of the total for the company.

There are other reasons Lockheed is "disliked" by investors, wrote Safran. That includes the fact that Lockheed lost the next-generation fighter jet program to Boeing, delays in upgrading F-35 technology, and higher costs in classified programs.

The point to be aware of is that all of those factors could fade next year. "We think the money is made before it is clear a turnaround is underway," Safran wrote. "That makes 2026 a critical year for the stock as we think investors get clear evidence of a recovery with each earnings report."

For now, his peers remain skeptical. Overall, 36% of analysts covering Lockheed stock rate the shares at Buy, according to FactSet, while the average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Lockheed shares is about $535, up about 15% from recent levels.

Lockheed's 6.5% free cash flow yield offers some support for investors thinking about dabbling in the turnaround story. Defense stocks typically trade with a 4% free cash flow yield.

Lockheed stock was down 0.2% at $465 in premarket trading on Monday, while futures on the S&P 500 and Dow Jones Industrial Average were flat.

Write to Al Root at allen.root@dowjones.com

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November 17, 2025 08:52 ET (13:52 GMT)

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