.September 24, 2024 at 2:19 PM

Leonardo DRS (NASDAQ:DRS) saw a 5% drop in shares today after Bank of America downgraded the company to Neutral, stating that the stock’s valuation already reflects its potential upside. Despite strong performance and a significant backlog growth, BofA sees better opportunities in the market with companies focusing on global defense spending and Navy initiatives.

The new South Carolina facility for DRS, supporting the Columbia-class submarine program, is expected to boost profitability and efficiency, but benefits may not be realized until operations begin in 2026. BofA believes further stock appreciation is limited until progress is made in the Columbia-class program or from other defense contracts.

Analysts view the AUKUS submarine partnership as a long-term growth opportunity for DRS, but feel the current stock price already accounts for much of this potential. BofA suggests that until significant growth materializes from defense contracts or the Columbia-class program, there may be limited room for stock appreciation at the current valuation.