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CNBC
an hour ago
- CNBC
Trump's meeting with Putin is a win-win for European defense stocks, no matter the outcome
European defense stocks have further to run regardless of whether U.S. President Donald Trump and Russian counterpart Vladimir Putin achieve a breakthrough on the war in Ukraine later this week, market watchers say. Trump and Putin are slated to meet in person in Alaska on Friday, with a view to discuss what it would take to end the more-than-three-year conflict that began with Russia's full-scale invasion of Ukraine in early 2022. Reports that the two heads of state would meet buoyed broader European equities on Thursday, but sank regional defense stocks . Concerns about Russian aggression had contributed to decisions by European governments and the NATO military alliance to drastically hike their defense budgets, benefiting security companies operating in the region . So far this year, the Stoxx Europe Aerospace and Defense index has surged by 52%. Following three consecutive days of losses after the Trump-Putin summit was announced, the index regained some ground, and was last seen trading 1.3% higher in Thursday's session. Market watchers told CNBC that a deal to end the fighting in Ukraine — which may not be on the horizon of Friday's meeting — was unlikely to throw Europe's defense growth off course. 'Win-win' for defense stocks In emailed comments to CNBC on Wednesday, Dmitrii Ponomarev, product manager at VanEck EU, pointed to a recent Financial Times report that Europe is "building for war," with arms sites expanding at roughly thrice the pace struck during peace time. He labeled this as "evidence that the current ramp is broader than Ukraine resupply alone." "No firm would add that much capacity if it depended only on Ukraine shipments; the bigger driver is NATO Europe's pivot to modernization and restocking under the new 5% of GDP long-term goal, of which about 3.5% is the truly comparable "core" defense spend, anchoring multi-year demand," he said. "Even with a peace deal, stockpiles don't magically refill: governments still face years of munitions and air-defense replenishment, so revenues likely shift from short-term surge programs toward steadier replenishment, sustainment, and long-horizon modernization." VanEck runs a $6.9 billion Defense ETF, which includes stakes in some of Europe's biggest defense stocks. Among the fund's top holdings are Italy's Leonardo , France's Thales and Sweden's Saab . Ponomarev said that companies that rely more heavily on deliveries to Ukraine or supplying short-cycle munitions "may feel a sharper de-rating if urgency fades" from any potential breakthrough emerging from this week's Alaska summit between the Russian and U.S. leadership. "[But] more diversified primes with long-cycle programs, services, and sustainment should be better placed to absorb near-term volatility," he said. Asked on Monday whether the European defense boom remained a long-term story regardless of the outcome in Ukraine, Christopher Granville, managing director of TS Lombard, said he "strongly agrees" that the momentum has further to run. "My call on European defense stocks since about 2023 — when it became clear that the Russian military was extremely powerful and was not going to be rolled out of those territories in eastern and southern Ukraine — has been buy on any weakness, on any temporary pullback, because this is a win-win for European defense stocks," he told CNBC's "Squawk Box Europe." Granville pointed out that either the negotiations would go off the rails on Friday — an outcome that he labeled "more than perfectly possible, if not likely" — or peace would be struck. The former would result in the need for America and Europe to replenish their arms inventories, he said, while the latter would lead to "a very powerful Russian military." "Although the words victory and defeat [would] be bandied around, [this would be] a Russian military which has to an extent, prevailed," he said. "That reality will force a continued increase in defense procurement by European governments, and it's also good for European defense stocks. Either way, it's a winner." Granville noted that markets had been discounting the second scenario's ability to benefit defense companies. "From time to time, those names pull back a bit — you should buy on that weakness in my opinion," he advised. 'At least a decade' of rearmament Defense company leaders have been telling CNBC in recent weeks that an end to the Ukraine war would be unlikely to derail the boost to European defense spending. In conversation with CNBC's "Worldwide Exchange" on Monday, Dimitrios Kottas, co-founder and CEO of Greek autonomous defense tech developer Delian Alliance Industries, said the timing of Europe's consensus to modernize defense capabilities was correlated with the invasion of Ukraine, but argued that this rearmament would last "at least a decade." "It's something that is driven by historical macroeconomic forces, [that are] much stronger than the current ongoing invasion in Ukraine," he said. Micael Johansson, CEO of Swedish defense giant Saab , meanwhile insisted the growth in European defense was "absolutely" a long-term trend. "I have a hard time seeing, after all that happened with the invasion in Ukraine and the aggressive neighbor that we have to the east … even if we get a ceasefire or peace deal that is reasonable with Ukraine, that [governments] would step back and say it's over," he said in an interview with CNBC toward the end of July. Earnings misses and downgrades The bull run this year hasn't been a continuously upward trajectory, even without questions surrounding the future of Ukraine. Shares of German arms manufacturer Rheinmetall shed 8% on Thursday, after the firm's earnings came in below expectations . The company said contracts had not been awarded during the reporting period given the election of a new government in Germany, but noted that an anticipated influx of orders in the second half of 2025 meant Rheinmetall was able to confirm its full-year guidance. Rheinmetall is one of the best performers in European defense this year, with its shares gaining roughly 160% over the course of 2025. In a Friday note, Deutsche Bank's Christoph Laskawi argued that Rheinmetall's second-quarter result "does not change the investment case by any means." "The order intake potential ahead remains significant and the win rate should be high which is the basis for sizeable revenue growth in the coming years," he said. Back in June , Citi's European Aerospace and Defence analyst Charles Armitage downgraded Hensoldt, Renk and Saab — whose shares have all more than doubled in value this year — to give them a "sell" rating. He argued at the time that the companies were "pricing in more growth than seems likely." A lot of optimism nevertheless still remains in the sector. "It's no surprise [defense] share prices have jumped sharply this year, maybe to unsustainable levels in the short term and a welcome resolution or ceasefire in Ukraine may see their prices soften," Neil Birrell, chief investment officer at U.K. investment management firm Premier Miton, told CNBC by email. "However, the spend on defence and related infrastructure is here to stay and will be taking place over the coming years and decades. The move to greater … regional self-reliance for defence, energy, food and raw materials is a very long-term one. Defence stocks will be big beneficiaries of that."
Business Insider
an hour ago
- Business Insider
The hot, new celebrity side hustle
Everybody wants to be Ryan Reynolds. Donald Trump wants to be Ryan Reynolds. The " SmartLess" podcast guys want to be Ryan Reynolds. Even Klarna wants to be Ryan Reynolds. I don't mean they want to star in "Deadpool" or marry Blake Lively (though neither of those is a bad deal). I mean that they're all slapping their brands on mobile phone networks in an attempt to make a little extra bank. If you're familiar with Mint Mobile, a mobile phone network that offers inexpensive prepaid plans, it's probably because you've seen Reynolds in an ad for it. The actor-turned-entrepreneur bought an estimated 25% stake in the company back in 2019, positioned himself as its spokesperson, and then sold it to T-Mobile for $1.35 billion in 2023, with Reynolds reportedly making $300 million off the deal. The concept of Mint Mobile isn't new: Virtual mobile network operators, which are telecom companies that offer mobile services without owning their own network infrastructure, like towers and stations, have been around for a long time. Some examples, besides Mint, include Cricket Wireless and Boost, though the latter is becoming a full-on wireless carrier and investing in its own 5G network. Reynolds offered a new spin by successfully attaching a big-name brand or celebrity to one. His achievement seems to have inspired others to get in on the game, including the president, some podcast hosts, and a buy-now-pay-later company. "It's all Ryan Reynolds' fault. Sort of," says Avi Greengart, the founder and lead analyst at Techspontential, a research and advisory firm. In June, the Trump Organization announced the launch of Trump Mobile. Its website says the service will offer "All-American performance" on a $47.45 a month plan that includes unlimited talk, text, data, and calls to 100 international destinations. The Trumps are also selling a $499 gold-colored phone to accompany the plan. Everyone else on this list is thinking that if Ryan Reynolds can do it, why can't they? The same month, Will Arnett, Jason Bateman, and Sean Hayes, actors and the hosts of "Smartless," said they are starting SmartLess Mobile, which promises to be "direct-to-consumer, data-sane, and refreshingly BS-free." Their website boasts, "Friends don't let friends overpay." SmartLess' value proposition is that it offers inexpensive, limited data plans that start as low as $15 a month. The argument is that most people have plans that give them unlimited cellular data, but they don't actually need all that download capacity, given how widely available WiFi is, so they wind up overpaying. "The quick math is about half of the country use 10 gigs or fewer, but it's almost impossible not to buy unlimited," says Paul McAleese, the CEO of Smartless Mobile and a mobile industry veteran. "Why we did it is because we recognize that gap, that data gap, which is really unique compared to any other product category. You don't go into the grocery store and buy 40 gallons of milk and consume two and then do it again the next month." As The Wall Street Journal noted around that time, celebrity cellular brands seem to be everywhere. Consumer brands are joining in, too. Klarna, the Sweden-based buy now, pay later company, is launching a mobile network of its own, too. In June, it invited consumers to sign up for a waitlist to join its $40-a-month plan. It may seem strange for an installment lender to get in the wireless game, but the company says it's a step in continuing to build its "neobank offering." "Everyone else on this list is thinking that if Ryan Reynolds can do it, why can't they?" says Craig Moffett, a cofounder and senior research analyst at MoffettNathanson, an equity research firm. It's not dissimilar to the rich and famous hopping on the liquor train in recent years. There's Reynolds' gin, Snoop Dogg's wine, George Clooney's tequila, Kendall Jenner's tequila, Kevin Hart's tequila. In a way, telecom is the new tequila. "It's a sign of the times that every celebrity's reason for getting up in the morning is to think of ways they can monetize their celebrity," Moffett says. Mobile virtual network operators, which industry insiders call MVNOs, buy excess network capacity in bulk from major carriers — AT&T, Verizon, and T-Mobile — and sell it under their own brands. They profit from the differential between the wholesale rate they get and the amount they charge customers. "It is a capital-light alternative without having to invest considerable sums in acquiring a licence, constructing a network, and so forth," says Paolo Pescatore, a telecom analyst at PP Foresight. He says that it can also work for brands that have a similar business to tack on an extra service for their customers, such as Comcast's XFinity Mobile, which it can tie in with its broadband service. For carriers, MVNOs are a way to make money off of capacity they're not using and try to reach niche markets they may not be able to connect with on their own — customers of different demographics, who speak different languages, and who have different interests. Their brands are very general, and in their marketing, they have to appeal to the general population. It's low risk. If the thing fails, no harm, no foul. "Big carriers are not the most creative kind, and their advertising focuses on big customer segments. They don't have the time, effort, and focus to go after smaller customer segments," says Roger Entner, the founder and lead analyst at Recon Analytics, a research and analytics firm. "It's low risk. If the thing fails, no harm, no foul." MVNOs are just a small sliver of the mobile market. Entner estimates there are about 15 million MVNO customers in the US (that excludes people who use MVNOs tied to cable companies, which are an additional 19 million or so). By comparison, the major carriers have upwards of 340 million. Anastasia Kārkliņa Gabriel, the author of "Cultural Intelligence for Marketers," says that because consumers tend to distrust the big telecom players, an MVNO may signal a "perception of independence" for potential users. It gives an "illusion of being separate from the major telco brands," she says, even if that's far from the case. Klarna is working with AT&T, SmartLess is with T-Mobile, and the Trump Organization says they're working with all three major carriers. For the brands and individuals trying to launch mobile networks, the hope is that they have enough clout with their existing fan bases to get them to switch networks and sign up. Maybe you love Jason Bateman so much you feel like you have to have his phone plan, or you're so entrenched in Klarna's payments system and app, you switch your network to them. Or, in the case of the Trump family, you're MAGA. And given the president's long history of putting his name on things and promoting them, from buildings to steaks to wine, the move seems like a natural extension. "The only surprising thing about Trump Mobile is that he didn't try this already," Greengart says. McAleese, from SmartLess, says that while he's aware this may look like following in Reynolds' footsteps, that's not what's going on. Arnett served as a spokesperson for the Canadian company Freedom Mobile, which he also ran, back in 2018. "Will did that job, frankly, before Ryan ever did," he says. Just because celeb-affiliated mobile networks are blooming does not mean they will flourish. It's a tough business to be in. ESPN failed at its MVNO efforts two decades ago, even with all the power of, you know, ESPN — though that attempt was also before the iPhone existed. It's an easy business to start, but it's a hard business to operate, Moffett explains. "The MVNO network operator provides almost everything you need to get started. But once you spend money on marketing and customer service, it turns out to be a really tough way to make money," he says. "To succeed, you need to achieve meaningful scale, and very, very few MVNOs ever do." Phone plans are sticky. It takes time and effort to switch your carrier from one brand to another, though the barrier is getting a bit lower these days. It's especially difficult if your phone plan is how you're paying off your device, or you're on a family plan with multiple lines. Many MVNOs don't offer plans with more than one or two lines, and few help customers finance their devices. Where a lot of them run into a buzzsaw is when there's not enough differentiation going on. As much as people may idolize certain celebrities or relate to certain brands, it's just not clear that they do so enough to want their entire consumer lives to reside in their ecosystems. Beyond the branding, a lot of these networks aren't particularly special in terms of the price or service they offer. Maybe they'll get some people, via social media posts and ads, but it may not be enough to grow and sustain a thriving business operation. "Where a lot of them run into a buzzsaw is when there's not enough differentiation going on," Entner says. "They bring nothing unique to it." He was skeptical of Klarna's move, too. "It's a lower-cost acquisition channel, because if you're already paying off your burrito, they can also say, 'Hey, by the way, I know you're broke. Here's cheap service on top of it,'" he says, referring to Klarna's BNPL deal that allows people to break up a DoorDash order into multiple installments. "'I know so much about you, so I can tailor my offer exactly for you.' That's the logic. I probably don't agree with it, but knock yourself out." A Klarna spokesperson says in an email that "unlike most new MVNOS, we're not starting from scratch, nor are we jumping on the bandwagon" and that its mobile offering has been in the works for many months as part of a multiyear strategy. "We're not trying to 'win' mobile or become the biggest carrier — this isn't about scale for its own sake," the spokesperson says. "It's about solving a very real problem for the tens of millions of consumers who already trust Klarna to help manage their finances." SmartLess's McAlease says they "wish everyone well" who's trying to launch an MVNO right now, because competition is good for the industry, but "they're just kind of on that unlimited train, and that might work for them and for their audience." Initial marketing efforts have focused on the SmartLess guys, for obvious reasons — you've got three big celebrities and a giant podcast in the mix, so why not? But it will soon shift more to what actually differentiates it. "You're going to start seeing much more product- and price-focused things over the course of the next while," McAelase says. "It's always tricky for MVNOs to break through the noise, and we're fortunate to have a brand and principles that are happy to do that." Pescatore says that MVNOs have been more successful in other countries, such as the supermarket Tesco's mobile network in the UK. But it's challenging. "There are opportunities in a mature market like the US, given the price of existing services from mobile network providers. Ultimately, it needs to tightly integrate and complement the existing service and offer something truly novel to attract subscribers," he says. The track record of these projects working out may not deter brands and public figures from trying. Entner says he knows of multiple MVNOs that are in development. Apple has long faced speculation that it might launch an MVNO, though it always denies it. Apple did not respond to a request for comment. Will all these projects work out? It seems unlikely, but it could happen. Some of these packages are pretty cheap, and hey, if you like some actor enough to switch your cellphone plan for them, by all means.
CNBC
4 hours ago
- CNBC
How Putin could try to outmaneuver Trump when they meet
Russian President Vladimir Putin's standing in the West may be pretty low, but he's a skilled and seasoned statesman who shouldn't be underestimated, analysts say — and he's likely to be looking to outmaneuver his less experienced U.S. counterpart when the leaders meet in Alaska on Friday. Putin and U.S. President Donald Trump are meeting to try to negotiate an end to the war in Ukraine, but close followers of Moscow's leadership are skeptical that any lasting resolution will be reached at the summit. "Let's be clear, Putin does not take Trump seriously," Tina Fordham, founder of Fordham Global Foresight, told CNBC ahead of the talks. "He has ramped up attacks, including on civilians in urban centers over the summer, and that has upset Trump and frustrated him, and frankly, it's humiliating," Fordham said, adding that meeting Trump would be "a low-cost photo op for Putin, who has a real track record of manipulating Trump administration officials." Ukraine and its European allies (who have not been invited to the talks) also argue that Putin is not serious about ending the conflict of more than three years. Kyiv's leadership also claimed this week that intelligence suggests Russia is preparing to mount new offensives , rather than preparing for a ceasefire or peace. CNBC contacted the Kremlin for a response to the claims and is awaiting a response. Military analysts cited several reasons that Russia might not want to end the war before it needs to, such as its forces' relatively advantageous position on the battlefield despite high attrition rates; entrenched position in Russian-occupied regions in the south and east of Ukraine; and ability to throw more manpower into the fight. Maximum concessions It's therefore likely that Putin will try to extract the as many concessions and benefits for Russia as he can from the United States when he sets foot on American soil for the first time in almost a decade. "The Russian side will likely seek to broaden the agenda beyond Ukraine, emphasizing the potential for strategic geopolitical and economic cooperation — including lucrative energy deals and potential arms control or strategic weapons treaties," Andrius Tursa, Central and Eastern Europe advisor at risk consultancy Teneo, said in emailed comments this week. "The Kremlin likely hopes that the transactional nature of Trump's approach to foreign policy will help advance Putin's objectives in Ukraine, such as territorial concessions, restrictions on Ukraine's sovereignty and military capabilities, and replacement of its political leadership," he added. The Kremlin's awareness of Trump's transactional nature when it comes to deal-making is likely to underscore how Putin approaches him during talks, and Putin is a skilled negotiator, according to Christopher Granville, managing director at TS Lombard. "Putin is always skillful in using 'give and take,'" he told CNBC's " Squawk Box Europe " on Monday. "True, Putin's got a big win [by being invited to Alaska] and securing negotiations on a deal before a ceasefire," he said, "but he's given Trump something." "He's given the impression that Trump's hardline has worked, that Putin has offered concessions on territorial swaps ... and that's already a sign of this skillful 'give and take' — or illusion of 'give and take'' —which President Putin has deployed so successfully on many occasions in the past," he said. Trump showed weakness A potential source of weakness for Trump as he heads into the meeting is that Putin will recognize that the U.S. president has, despite repeated threats, resisted heaping more punitive sanctions on Moscow even though it refused a ceasefire with Ukraine that was supported by both Washington and Kyiv. In fact, Trump has so far preferred to punish Russia's friends and trading partners such as its oil buyer India — rather than Russia itself — with higher tariffs and the threat of "secondary sanctions." "Putin is smart enough to recognize that Trump is turning up the heat, but it's very significant that Trump decided to turn up the heat on his friend [Prime Minister] Narendra Modi in India, and not on Putin himself," Fordham told CNBC. "It tells us that President Trump is very reluctant to actually put the pressure directly on Putin, so much so that he's willing to jeopardize this relationship with India, which is a hugely important ally within the wider context of U.S.-China relations," she added. Trump has also been accused of showing his cards to Russia by suggesting that Washington could entertain the notion of Ukraine "swapping" some territory with its neighbor, a suggestion that has provoked consternation in Europe, which has urged Trump not to concede too much to Putin. Kaja Kallas, the EU's foreign policy chief, told CNBC on Tuesday that Putin was stringing Trump along and was just " pretending to negotiate ." CNBC has asked the Kremlin to respond to the claim. Russia's economy helps But although Putin appears to be entering the talks from a position of strength rather than weakness — a position not many global leaders find themselves in when meeting Trump — the Russian president could arguably be looking for an off-ramp as Russia's economy and citizens labor under the weight of international sanctions, labor shortages and rampant inflation, which even Putin described as "alarming." ″[Putin] starts from a relatively strong position on the battlefield. They're advancing," Richard Portes, head of the economics faculty at the London Business School, told CNBC Monday. "On the other hand, from the economic point of view, he starts from a weak position. The Russian economy is not in very good shape. They're running a significant fiscal deficit, partly because oil revenues are down very substantially, oil and gas [are down] because of the oil price. And ... this is a weak economy," Portes told CNBC's " Europe Early Edition. " Michael Froman, president of the Council on Foreign Relations and former U.S. trade representative, told CNBC that Putin could agree to a ceasefire, but only if Trump offers serious concessions on Russia's oil exports, which have come under sanctions and restrictions, including an oil price cap. "I think if Putin comes in and says, 'Alright, I'm willing to accept a ceasefire, but you got to relieve the pressure on my oil sales,' well, that's a deal that that could be talked about, right? That's the president using leverage to get Putin to come to the table, to do something he was not willing to do before, which is to accept an unconditional ceasefire, and that would put an end to the fighting." "If the president is able to come back from Alaska with a ceasefire, that will be a significant achievement, if it they start getting into trading territory at Ukraine's expense, then it's not going to be a very good or sustainable agreement," Froman said.
