From meteoric rise to crash: defense sector stock plummets

Fuse manufacturer Arit Industries is recording a sharp decline of nearly 20% today, Thursday, following its latest financial report, making it the worst performer in the TA-125 index. This drop marks a total plunge of over 75% from its January peak, when the company reached an inflated market valuation of 7 billion shekels following the post-October 7 market frenzy that saw shares soar by over 3,000% by March of this year.

According to the company's report, revenues fell by nearly 40% compared to the same quarter last year, while net profit plummeted by over 80%. The outlook for the second half of the year remains bleak, with the company projecting full-year 2026 revenues of approximately 340 million shekels, a 42% decrease from the previous year.

The announcement that angered investors

While the poor financial data was largely anticipated, the announcement of a 500 million shekel dividend distribution sparked outrage. This amount mirrors the capital raised by the company just months ago at peak valuations. Distributing these funds now, while the stock price is low, primarily benefits controlling shareholder Zvi Levi, effectively resulting in paper losses for other investors. Analysts have labeled the move a "dirty trick" and an act of "profiting at the expense of investors."

Arit serves as an extreme example of the broader trend within the defense sector. The defense index peaked in March this year amid heightened security tensions. Investors rushed to buy defense stocks, often disregarding disconnected valuation multiples. The correction has been swift and severe, with the index shedding over 35% of its value in less than six months. The downturn has spared no one, impacting even industry leaders like Elbit and Next Vision.