The best outcome from that meeting would be a signed LOI. We know that Canada felt it did not really get what it wanted out of the F-35 industrial partnership, while Saab is allegedly offering 10,000 jobs to Ottawa. Canada seems to be seriously considering Gripen. But let’s not lock ourselves into wishful thinking.
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Hello investors! There were two small but strategically interesting news from Saab in recent days. Here is our short take:
- Saab, Boeing, and BAE Systems have signed a Letter of Intent to offer a full-stack T-7A-based training system to the RAF (Royal Air Force), pairing the existing T-7A Red Hawk platform and its digital design heritage with a UK-based final assembly line and domestic industrial ecosystem led by BAE. The move is a logical next step in the T-7 cooperation rather than a surprise, and it ties Saab’s Aeronautics business more tightly into UK and transatlantic air combat and training networks as the UK looks to replace its aging Hawk fleet under the 2025 Strategic Defence Review. For Saab, the Letter of Intent is a strategically positive piece of long-term optionality in advanced jet training and blended live synthetic training environments, but it is a campaign framework rather than a firm order, with unknown volumes, timing, and pricing, so it has no immediate impact on the order book, financials, or our estimates.
Press release: Saab, Boeing and BAE Systems to collaborate on Next-Gen pilot training
- Saab has invested 10 MUSD in Swedish space company Pythom, taking the lead role in its latest funding round and adding another small brick to its long-term technology portfolio. The ticket is financially insignificant relative to our 2025 revenue estimate of ~76 BSEK and does not move our estimates or stance on the share, but it is strategically consistent with Saab’s pattern of targeted investments in emerging domains such as AI, autonomy, and now space. Pythom’s focus on light, rapidly deployable, and cost-efficient launchers fits Saab’s ambition to close capability gaps in the space domain, strengthen Swedish and allied space capacity, and position itself for growing space-related defense demand, while keeping balance sheet risk low and buying optionality in a fast-developing ecosystem.
Press release: Saab invests in space technology company Pythom - Inderes
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“We are campaigning, and we have given them offers,” Saab CEO Micael Johansson told Reuters in an interview.
Risteilyohjusten ja muiden pitkänkantaman järjestelmien alati lisääntyvä käyttö lisää tarvetta tämän tyyppisille ratkaisuille.
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Hello defense sector followers and investors!
Saab received an order of ~2.1 BSEK from FMV for LSS Lv and Giraffe 1X. It is another step in Sweden’s gradual build out of brigade level ground-based air defense, showing how earlier ground-based air defense and Giraffe 1X purchases are being expanded into a more complete formation level solution rather than remaining one-off purchases. For Surveillance, it is a solid domestic sensor and C2 reference that sits alongside recent Giraffe 1X and MSHORAD wins in Sweden and export markets, but at ~1% of our 2027 revenue estimate it is best seen as a supportive data point for the order book (so far in 2025 at ~130 BSEK) and for policy driven demand in Saab’s radar and command-and-control portfolio rather than a thesis changing contract.
The press release: Saab receives order for ground-based air defence solution from Sweden - Inderes
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Poland orders three A26 submarines from Sweden, agreement to be signed next year
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Great big deals recently. Fighters, submarines and other nice things. The stock price reacted (in my opinion) very cautiously, even though such news is investors’ wet dreams.
This has been tried to explain to me too. It’s expensive. P/E is ugly etc. Still. Well, let’s stay on board and (maybe) buy more.
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Typically, these processes take a while, and those following the industry know about the projects and the most likely competitors.
But not everything is necessarily priced in yet. One interesting speculation I read about is NATO’s need to modernize its AWACS aircraft. The E-7 Wedgetail, previously considered a likely option, has dropped out of this, partly due to a lack of US support for that E-7 aircraft. For Saab, this is an opportunity, because the probability of Saab’s Globaleye aircraft getting into that NATO project increased significantly.
But then one can reasonably ask why the United States isn’t acquiring those E-7 AWACS aircraft for itself? Well, because they apparently meet the need with satellites. So, is it also possible that NATO will opt for a similar solution?
(https://themerge.co/p/decoys)
That Merge is actually a good source to follow these various opportunities worldwide. That newsletter also mentions other opportunities for Saab’s GlobalEye. Usually, competitors for various projects are well-known, and thus all of this is already priced into the stock.
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No GlobalEye deal comes as a surprise, as in many cases the selection decision is known/guessed long before, e.g., France. So they are more or less priced in (except, of course, at Inderes).
Ukraine’s future aircraft are not yet priced in, because frozen assets have not yet been unlocked, meaning the main funding is missing. Presumably Canada is also missing (from the pricing), because they are not in a “must-have” situation regarding fighter jets like Ukraine. However, several orders for GlobalEye are expected within a year.
France has possibly linked Sweden’s new warships and airborne surveillance aircraft:
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The recent media noise around the defense sector shows how easily headlines and rumors can shift prices in the short-term, sometimes far more than any change in fundamentals would warrant.
Consensus already expects robust backlog growth and better execution across the sector, and current valuations already discount (price in) a meaningful part of that. The key issue is not whether the cycle is in the price, but how many years of elevated growth, margins, and cash conversion the market has pulled forward for each name. Our view is that the market is most likely overestimating this in names with high exposure to short-cycle ground combat portfolios and sensor-heavy product sets (Saab included) where recent earnings upgrades and war sensitivity have pushed multiples to levels that are hard to reconcile with the underlying procurement paths.
Contract news and geopolitical headlines still create entry and exit points because they can move both sentiment and fundamentals, but the short-term impact on intrinsic value is usually difficult to gauge. Price discovery when fundamentals change, and how that feeds through to intrinsic value, is objectively a gradual process, so short-term price moves do not necessarily give a reliable picture. As an illustration, a defense company announcing a 7 BUSD order on a backlog of similar size could see its share price jump 5-10% (maybe more), depending on how well the market understands the company’s economics or the general hype around it. In simple terms, the order increases revenue visibility because the company can run its factories at higher utilization for longer, but the value impact still depends on capacity, margins, investment needs, and execution risk. If the company faces capacity constraints or must invest heavily to deliver, the market’s initial reaction can easily overshoot what the order is worth in discounted cash flow terms. Sharp short-term moves like that only make sense relative to a long-term valuation anchor that assumes multiples revert toward more sustainable levels as growth from the upcycle slows. Without that anchor, trading on news flow is effectively gambling.
This does not imply that a sector must revert to its historical valuation levels, but history provides context on where valuations could settle under different scenarios. We also need to understand whether a business today is structurally different from its past and how that should affect the way the market values it. The market’s “not knowing for sure” can just as well mean that current prices reflect a mistaken view of duration or profitability that will eventually be corrected.
Two examples of investors:
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Price driven investors say: “The share price is down this month, that must be a good entry point.”
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Anchor driven investors say: “The share price is down this month. How does that compare with our view of fair value?”
Both may be right on a given trade, but only one wins in the long run. You want your expectations to be right for the right reasons, not because you got lucky once or twice. We want to avoid the overconfidence bias, because it turns any investor into a ticking bomb in the markets.
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According to this article, Saab got badly beaten compared to the F-35. Not good, no.
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Interesting read. It certainly makes one wonder. In our view, the choice between Gripen and F-35 for Canada may presented as a technical capability decision, but the evaluation itself is shaped by political choices about alliances, industrial policy and threat scenarios. Also, the scoring framework may be described as reflecting only threat scenarios and capability needs, yet a different set of political priorities could still make Gripen the better strategic option for Canada. In practice, the choice is a political one between a platform that best serves the integrated US led alliance model and a platform that prioritizes Canadian industrial autonomy and alternative partnerships, even if both can be justified on “technical” grounds. While Ottawa is currently committed to an 88 aircraft F-35 fleet, the ongoing Saab-Bombardier talks and unease over F-35 costs mean that a future mixed fleet in which Canada adds a smaller number of Gripen aircraft remains a plausible political and industrial scenario.
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Saab is staying active, as expected. Q4 is seasonally strong in orders and deliveries, and the company continues to fill its European order book, much to the market’s delight.
On Monday, Saab announced a third MSHORAD (Mobile Short-Range Air Defense) battery for Lithuania, a ~1.4 BSEK order for deliveries in 2026-30. The system combines Giraffe 1X radar and RBS 70 NG effectors on Oshkosh JLTVs (Joint Light Tactical Vehicles), plugging into its GBAD (ground-based air defense) C2 (command and control) architecture, providing the Lithuanian Army with more mobile, networkable short-range air defense capacity. Fundamentally, the contract is small against Dynamics’ ~90 BSEK backlog and ~18 BSEK LTM revenue. However, it is another data point that Saab’s short-range air defense offering is competitive and that Baltic needs for ground-based air defense are translating into real orders. We keep our estimates unchanged, but see the order as supportive for Dynamics’ medium-term growth case and for Saab’s ability to convert the current security environment into a thicker, more diversified backlog.
Today, Saab also announced its first live training order from the Spanish Army under a framework agreement with a maximum value of ~34 MEUR (~400 MSEK). The initial contract covers Individual Duel Simulation systems from its GAMER (Gunnery & Maneuver Exercise) family, delivered with local partner Tecnobit. Financially, this is small for Dynamics and even smaller in a group context than the Lithuanian MSHORAD deal, given its ~72 BSEK LTM revenue and ~200 BSEK backlog; it does not move our estimates. Strategically, however, Spain is a useful reference customer for Dynamics’ Training and Simulation business, as the systems can scale from small unit training to larger multinational exercises, strengthening Saab’s position in European land forces’ training infrastructure.
In addition to recent larger developments in Kockums and Aeronautics, these two contracts exemplify how Saab adds smaller, recurring pieces to a growing European defense footprint, even when headline numbers are not large enough to distinctly affect fundamentals on their own.
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