Northrop Grumman (NOC) Target Lifted as Morgan Stanley Sees Buying Opportunity Despite Budget Uncertainty

Northrop Grumman Corp. (NYSE:NOC) is one of the best defense stocks in Goldman Sachs’ portfolio. It is a global aerospace and defense technology company that is engaged in the design, development, production, integration, and maintenance of advanced systems across aeronautics, space, defense electronics, and mission solutions.

As a leading U.S. defense contractor, Northrop Grumman Corp. (NYSE:NOC) has a strong portfolio in next-generation defense and space platforms, positioning it as a long-term beneficiary of rising defense budgets.

On October 15, Morgan Stanley’s Aerospace & Defense analyst Kristine Liwag reiterated her Overweight rating for Northrop Grumman Corp. (NYSE:NOC) and raised her price target from $625 to $720. In her note, she gave out a very interesting take on the prime contractors, with NOC remaining one of her top picks. Liwag notes that the ongoing US shutdown and delays in budget decisions will make it difficult for companies to precisely factor in the potential impact into their 2026 guidance. However, she suggested that weaker guidance from these companies presents an opportunity to buy, as there is potential for upward revisions once visibility increases regarding funding decisions.

Meanwhile, the defense space has seen several favorable macro developments. On October 2, the Canadian Government announced the creation of the Defence Investment Agency (DIA), which was seen as a positive development towards demand for defense contractors/ suppliers. As another significant event, on September 29, the Pentagon had reportedly asked its missile suppliers to double or even quadruple production to replenish the low stockpile of weapons, according to The Wall Street Journal. The news agency, which quoted people familiar with the matter, said that this step was taken to prepare for a potential future conflict with China.

With increasing armed conflicts, countries are increasing their budgets on deterrence and modernization of their defense capabilities. This expansion in both domestic and international investments in defense infrastructure and technology is expected to support growth for Northrop Grumman Corp. (NYSE:NOC).

While we acknowledge the potential of NOC as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.