F-35 maker’s stock downgraded after alleged China’s 6th-gen fighter debut: US media
By Liu Xuanzun and Li Yawei
Published: Jan 03, 2025
Stock of US arms firm Lockheed Martin, maker of the fifth-generation fighter jet F-35, was downgraded to Hold from Buy at Deutsche Bank with a price target of $523, down from $611. An analyst at the bank named "China's combat aircraft modernization efforts" as a reason behind the decision, after videos emerged online suspected of showing alleged China's six-generation fighter jet.
Deutsche Bank says it lost conviction in its original upgrade thesis from July, and struggles to find new reasons to remain constructive on the shares, US news outlet Business Insider reported on Thursday.
"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," US news outlet Barron's quoted Deutsch Bank analyst Scott Deuschle as saying.
Deuschle said he sees "the reveal of further advancements in combat aircraft capabilities by China as potentially undermining long-term [Department of Defense] demand for the F-35 aircraft."
The Barron's report noted that China recently published videos of its sixth-generation jet fighter. The F-35 - which accounts for some 25% of Lockheed's total sales - is a fifth-generation jet fighter.
A number of videos and photos emerged on Chinese social media on December 26, showing alleged test flights of a new type of aircraft, shape of which resembles the ginkgo leaf. Shortly after the emergence of the large "ginkgo leaf" aircraft, another video circulated online on December 26, showing another new type of aircraft, seemingly smaller than the "ginkgo leaf" one, in an apparent flight test.
The Washington Times quoted defense analysts as saying that the two new fighters "appear to be Beijing's first advanced sixth-generation stealth fighters."
Neither the Chinese military nor the Chinese defense industry has verified the videos and photos, or made any official announcement on the aircraft as of press time. However, the Chinese People's Liberation Army (PLA) Eastern Theater Command on Wednesday released a music video to celebrate the New Year, with a scene showing a ginkgo leaf and a bird triggering netizens' associations to the alleged debuts of China's sixth-generation fighter jets.
While the US has sixth-generation jet fighter programs, referred to as next-generation air dominance, or NGAD, and Lockheed is likely bidding to provide those planes, how the process will play out isn't clear, Barron's said.
The US Air Force has decided to let the incoming Trump administration make its own decision on the path forward for its NGAD fighter. In the summer of 2024, the US Air Force paused its effort to develop and build a sixth-generation fighter amid concerns about its potential costs, US media outlet the Defense News reported on December 6.
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.
However, despite of this information being unconfirmed, Lockheed Martin's long-term prospect remains in doubt, leading to the downgrading of its stock.
While the videos are not confirmed, they indicated to the outside world that China is progressing fast in the scientific research and exploration of its next-generation military aircraft. By comparison, there are no publicly known videos showing the testing of the US' sixth-generation fighter jet, Wang noted.
Chinese military expert Song Zhongping told the Global Times on Friday that Lockheed Martin has wasted too much resources on the F-35. In the meantime, China has developed not only the J-20 and J-35 of the same generation, but also possibly aircraft of the next generation, if the videos turn out to be true.
