• Lockheed Martin stock has dropped ~7% since the conflict began, defying expectations that defense names would rally.
• Successful Artemis II return boosts credibility in space, strengthening prospects for future NASA and deep-space contracts.
• Near-term caution persists, but long-term upside tied to rising defense budgets and missile contracts is keeping bullish hopes alive.

Lockheed Martin Corp. (LMT) has been among the surprising underperformers of the U.S.-Israeli war with Iran. Defense stocks were widely expected to benefit from the conflict, but since fighting began on Feb. 28, LMT has shed nearly 7%, even as the S&P 500 has declined just 1%. Now, investors could hope for a different kind of mission success to lift the stock much higher.

LMT's Orion Spacecraft

Earlier this month, the Lockheed-built Orion spacecraft successfully returned four NASA astronauts from the Artemis II mission following a 10-day, 700,000-mile round trip around the Moon, the most ambitious crewed lunar mission in more than 50 years. While Lockheed Martin and Airbus built the spacecraft itself, Northrop Grumman, L3Harris Technologies, and Honeywell supplied key components and systems.

"Orion performed exceptionally well throughout the mission, including its most demanding phase, Earth re-entry," said Robert Lightfoot, president of Lockheed Martin Space Systems. "The spacecraft's heat shield withstood temperatures nearing 5,000 degrees Fahrenheit, while its parachute system executed a precise descent sequence to ensure a safe landing."

As NASA's prime contractor, a successful mission strengthens Lockheed's position for future contracts, including potential research and service roles in planned Mars missions. The company said it will apply lessons from Artemis II to refine the spacecraft for the upcoming Artemis III and IV missions.

Why Lockheed And Other Defense Stocks Are Stuttering

The defense sector's initial pop following the U.S.-Israeli military action in the Middle East faded quickly, weighed down by high valuations and the growing possibility of a diplomatic resolution to the conflict.

Zoom out, however, and LMT's recent slide looks like a speed bump. The stock is up over 33% over the past 12 months, comfortably outpacing the S&P 500. 

Last week, Jefferies raised its price target to $640 from $630 while keeping a 'Hold' rating. However, the firm's near-term view is cautious, forecasting first-quarter revenue of roughly $18.0 billion, below the consensus of $18.4 billion, and earnings per share about 2% below consensus. The analyst noted that while full-year 2026 guidance is likely to be maintained, given the company's track record, the first quarter is unlikely to materially de-risk the annual outlook.

What Retail Traders Think About LMT

Retail sentiment toward LMT remains 'bearish' on Stocktwits, though the reading has improved meaningfully from a month ago as broader market volatility tied to Trump's shifting stance on Iran has eased somewhat.

Bullish traders are pointing to two distinct tailwinds. On the space side, the Artemis II splashdown drew celebratory posts. "Successful splash down of Artemis 2," posted one bullish user.

On the defense spending side, optimism is being fueled by a $4.7 billion U.S. government contract awarded to Lockheed last week to accelerate Patriot missile production, as well as President Trump's request for a "historic" $1.5 trillion defense budget for fiscal year 2027 — an annual increase that media reports say hasn't been seen since the Korean War of the 1950s. 

One Stocktwits user said LMT’s stock was "pinned as the market pauses to determine the next direction."

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