F-35 Maker Lockheed Martin's Stock Loses Value after Chinese Sixth Gen Fighter Rumor

Lockheed Martin's stock took a hit after Deutsche Bank downgraded the U.S. firm’s shares from "Buy" to "Hold," with a new price target set at $523, down from $611.

The downgrade followed rumors circulating online regarding China's potential development of a sixth-generation fighter jet, which analysts believe could affect the future demand for Lockheed’s F-35 fighter jet, a cornerstone of the company's sales.

Deutsche Bank cited concerns about China's combat aircraft modernization as a key factor behind its revised outlook.

"We're downgrading Lockheed to Hold [from Buy] as we feel our prior thesis struggles to hold water and we have increased concern on the long-term support for F-35 in the face of China's combat aircraft modernization efforts," U.S. news outlet Barron's quoted Deutsch Bank analyst Scott Deuschle as saying.

The analyst explained that the bank's previous optimism about Lockheed's future performance, particularly following an upgrade in July, had weakened due to China's progress in combat aircraft capabilities.

On December 26, multiple videos and photos surfaced on Chinese social media, reportedly showing test flights of a new aircraft resembling the shape of a ginkgo leaf. Shortly after, another video emerged, featuring a different aircraft, smaller in size compared to the "ginkgo leaf" design, also appearing to undergo a flight test. A recent official Chinese video showing a ginkgo leaf and a bird further fueled speculations of Beijing’s development of two new aircraft.

Wang Ya'nan, chief editor of Beijing-based Aerospace Knowledge magazine, told the Global Times on Friday that there have been several videos on test flights of alleged China's next-generation aircraft, but there has not been an official confirmation. 

The F-35, which accounts for around 25% of Lockheed Martin's total sales, is a fifth-generation aircraft, and its market position could face increased pressure if China develops sixth-generation fighter jets. Although China has not officially confirmed the authenticity of the videos showing the new aircraft, the footage has prompted analysts to suggest that Beijing may be close to unveiling its sixth-generation jets.

In the United States, while the Air Force has launched its own sixth-generation fighter initiative known as Next-Generation Air Dominance (NGAD), there are no publicly known test videos of such aircraft, unlike the growing number of reports from China. The U.S. Air Force paused its development of the NGAD fighter in 2024 due to cost concerns, further complicating the outlook for Lockheed's prospects.

Despite the unconfirmed status of the Chinese videos, analysts worry that Lockheed Martin may have overcommitted resources to the F-35 program, as China continues to develop both fifth-generation aircraft like the J-20 and J-35, and possibly a sixth-generation fighter.