Are £100 BAE Systems shares within reach?

Why have BAE Systems‘ (LSE: BA.) shares been soaring? I think it’s fair to say the sea change in NATO countries’ military spending played a large role. The many more billions allocated to defence budgets helped push the share price from close to £4 before the Ukraine war to around £20 today.

Should this trend continue then BAE Systems’ shares might reach the £100 mark near the start of the next decade. That’s surely a step too far, isn’t it? Or is it?

Up and up

In my view, a significant reason to think the share price could continue its trajectory is that the rise in defence spending has only just got started.

NATO countries – which count for a large amount of the firm’s sales – are ratcheting up spending. The amount jumped from 1.4% of GDP in 2014 to 2.3% in 2025. And the group has already agreed a 5% target for 2035. It’s possible this figure goes higher too – especially if tensions around the world increase.

It should be mentioned that with debt levels high in many of these countries, such a large increase may not be easy to find. Strained government budgets are a risk for a company like BAE Systems whose revenue is almost entirely from state spending.

But it’s not just NATO countries that could help here. A look at the BAE Systems’ order book shows deals including Eurofighter Typhoons for Qatar, anti-submarine frigates for Australia, Hawk trainer jets for India, ‘Ocean Patrol Vessels’ to the Brazilian navy, and licensing howitzer production with Japan.

Oh, and the world’s largest military spender? Well, the USA is BAE Systems’ biggest customer.

New kit

A wide customer base means little if they’re not buying, of course. But luckily, BAE Systems is at the forefront of the latest and greatest in defence technology.

Take its new Brontanax Collaborative Combat Aircraft (CCA), for instance. CCAs are drones that accompany piloted aircraft like Typhoons or the upcoming 6th generation Tempest.

Flying drones with these expensive and manned fighter jets can extend sensor range, act as decoys, jam radars, or take on risky manoeuvres with no risk to pilots. They look the part too:

Designed and built in Lancashire, and working with the Royal Air Force, the Brontanax was unveiled in July. A prototype should be ready to test by next year.

Only a handful of countries around the world are working on such systems, and BAE is the primary contractor in the UK and is also working on the Australian version too.

While the Brontanax is only a small part of the BAE Systems’ product catalogue, it’s a sign that the company’s diving headfirst into the new era of defence technology. This is a reason that the order backlog – already at a record £84bn – could continue to grow as defence spending increases worldwide. I think the stock’s worth considering.

Should you invest £5,000 in BAE Systems right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BAE Systems made the list?

John Fieldsend owns shares in BAE Systems.