Leidos Holdings, the American defence, aviation and IT services company, saw its stock price tumble to a 52-week low of $121.16 during trading on Wednesday. The decline marks a significant retreat from the stock's 12-month peak of $158.00, representing a drop of approximately 23 per cent. The sell-off comes amid broader weakness in the US defence sector as investors weigh the impact of prolonged budget negotiations in Washington and shifting priorities in global defence spending.
The company, which provides technology solutions to the US Department of Defense and intelligence agencies, has faced pressure from delayed contract awards and uncertainty over future Pentagon budgets. Analysts at several Wall Street firms have trimmed their price targets on Leidos in recent weeks, citing slower-than-expected revenue growth in its civil and defence segments. The stock is now trading at levels not seen since early 2023.
For UK investors, the decline in Leidos is a reminder of the interconnected nature of global defence markets. Many British pension funds and multi-asset portfolios hold exposure to US defence contractors, often through exchange-traded funds or actively managed global equity funds. While Leidos itself is not a household name in the UK, its performance can influence the overall returns of funds that track the S&P 500 or the industrials sector.
The broader defence sector has also been under pressure. The iShares US Aerospace & Defense ETF, a widely followed benchmark, has fallen roughly 8 per cent over the past month. Investors are concerned that a potential shift in US foreign policy or a reduction in overseas military commitments could dampen long-term demand for defence hardware and services. Some analysts, however, argue that the sell-off is overdone and that companies like Leidos remain well-positioned for secular growth in cyber security and digital warfare.
Commenting on the move, a senior analyst at a London-based investment bank noted: 'The market is pricing in a worst-case scenario for US defence contractors, but the reality is that budgets remain elevated by historical standards. Leidos has a strong backlog and a diversified revenue base. We see the current weakness as a cyclical dip rather than a structural problem.' The analyst cautioned, however, that near-term volatility is likely to persist until clarity emerges on the US federal budget for the next fiscal year.
Source: Market data from Yahoo Finance and Bloomberg.