Thales: Increasing Our Fair Value Estimate to EUR 190 Due to Higher European Defense Spending

We increase our fair value estimate for Thales to EUR 190 from EUR 156 to account for increased European defense spending, catalyzed by President Donald Trump's election victory. NATO's 2% gross domestic product defense spending target has long been a benchmark, but is inadequate after decades of underinvestment. Trump's push for NATO allies to spend 3% of GDP and more recently up to 5%, could drive substantial increases. We expect European defense spending to rise from 1.7% of GDP in 2023 to 2.4% by 2029 and 2.8% by 2032.