Electro Optic Systems Holdings Ltd (ASX: EOS) is one of the ASX defence stocks I think could surprise investors before the end of the year.

The shares are down 2.12% to $9.22 on Friday, leaving them around 27% below their August high of $12.58.

But I’m not too bothered by the recent weakness.

What interests me more is how quickly this stock can move when the company gives investors something new to get excited about.

At today’s price, EOS would need to gain around 41% to trade above $13.

Normally, that would sound ambitious over just a few months.

With EOS, I don’t think it is.

We’ve already seen how quickly EOS can move

Back in August last year, EOS announced its first export order for a 100kW high-energy laser weapon.

The roughly $125 million contract, was placed by a European NATO member state. EOS shares jumped more than 40% on the day.

That’s the type of move investors need to remember with this stock.

We saw something similar after last month’s half-year result. EOS shares jumped 23% on 25 August and traded as high as $11.98 just 2 days later.

EOS has also added some very large defence orders, including a US$124 million Slinger counter-drone contract announced in June.

If another big one drops before Christmas, I think the shares could move very quickly again and put $13 back in sight.

The business is starting to deliver

The big difference today is that EOS is no longer relying mainly on future potential.

First-half revenue surged 283% to $168.8 million, while underlying EBITDA swung from a $14.9 million loss a year earlier to a $21.6 million profit.

The order book also reached a record $846 million, which gives the company plenty of work already locked in.

Management has since lifted FY26 revenue guidance to between $360 million and $400 million.

Chief executive Andreas Schwer also said this week that he expects the order book to grow again before the end of the year.

If that happens, I think investors will have even more reason to get excited about where EOS shares could go next.

Could EOS shares reach $13?

I think they can.

TipRanks shows 3 current buy ratings, with an average price target of $13.40. Canaccord Genuity is the most bullish at $15, while Ord Minnett and Bell Potter have targets of $12.50 and $12.60, respectively.

That means the brokers are already looking at levels around where I think EOS shares could trade before Christmas.

With a record order book, and management expecting more orders before year-end, I think the setup looks very strong.

The post Could this ASX defence stock rocket back above $13 before Christmas? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Mortgage holders and ASX share investors alike could be facing not one, but two more RBA interest rate hikes this calendar year.

That’s according to Citi analyst Faraz Syed, who believes that ongoing inflationary headwinds Down Under will force the central bank’s hand.

What’s been happening with interest rates?

When Australians kicked off the New Year, the official cash rate stood at 3.60%. A level many hoped would be the medium-term peak.

Those hopes were dashed, however, as inflation began to pick back up even before the onset of the Iran war. And with that conflict adding fuel to the inflationary fire, predominantly by sending global oil prices skyrocketing, the RBA has already increased interest rates three time in 2026 to the current 4.35% level.

While some ASX shares have outperformed in this environment, pressure is beginning to show across the wider market.

Down 1.1% today at 8,727 points, the S&P/ASX 200 Index (ASX: XJO) is trading right where it was on 2 January and down 0.9% over 12 months.

And ASX 200 tech stocks, which tend to be much more sensitive to interest rate moves, have fared far worse.

Indeed, the S&P/ASX 200 Information Technology Index (ASX: XIJ) is down 22.8% in 2026 and has plunged 43.6% since this time last year.

Why borrowing costs are expected to keep rising in 2026

At its last meeting on 11 August, the RBA opted to keep rates on hold.

But the board cautioned:

While the impact of the Middle East conflict on inflation has so far been less than expected, headline inflation is still too high. Trimmed mean inflation also remains elevated and is little changed from the March quarter.

Fast forward to today, and the Brent crude oil price just topped US$109 per barrel as the Middle East conflict looks to be heating back up rather than cooling down.

Commenting on why he expects the RBA to increase interest rates two more times in 2026, lifting the cash rate to 4.85% by year end, Cit’s Syed said (quoted by The Australian Financial Review):

This view is driven by a two-speed economy, where a deepening housing correction is offset by an AI-related investment boom that is adding to capacity constraints.

Anaemic productivity, a tight labour market, and elevated oil prices likely mean inflation will remain stubbornly high, with our Q3 trimmed-mean CPI forecast at 1 per cent.

In our view, the RBA needs to hike further to get on the front foot of inflation, though a dovish Board could delay action. Consequently, we push our first rate cut forecast out to Q4 2027.

CreditorWatch chief economist Ivan Colhoun also believes mortgage holders and ASX share investors should prepare for higher interest rates. Though he expects the RBA will hike rates just once more, followed by an extended pause.

“Over the past month and following the release of the very high July CPI, many economists have changed their view back to the view that the RBA has not finished tightening,” he said.

Colhoun added:

With input and labour costs continuing to rise at rates well above those consistent with the return of inflation to target, this suggests the Board will need to make the unpopular decision to tighten interest rates again in September as the upside inflation risks it has been discussing materialise.

The good news is that interest rates will likely remain on hold for a considerable time afterwards.

The RBA will report its next interest rate decision on 29 September.

The post Brace for impact! Why Citi forecasts 2 more RBA interest rate hikes in 2026 appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Buying an S&P/ASX 200 Index (ASX: XJO) share becomes a little more serious when selling is taken off the table.

If I knew I had to hold an investment for the next decade, I would want businesses that could keep finding new ways to grow long after the initial purchase.

These three ASX 200 shares would make my shortlist.

Xero Ltd (ASX: XRO)

Xero would be one of my first choices.

Its accounting software has become an important part of how millions of small businesses manage invoicing, payroll, payments, reporting, and other financial tasks.

I like the position that creates. Once a business has moved its financial records onto Xero, connected its accountant, and added other applications, changing platforms can become increasingly inconvenient.

That can help Xero retain customers while gradually offering them more services.

The company also still has a surprisingly large market left to target. Xero had around 4.9 million customers in FY26, while management has previously pointed to a global addressable market of around 100 million small businesses.

Payments, payroll, artificial intelligence, and its acquisition of Melio could also allow Xero to play a larger role in the financial lives of those customers.

Over 10 years, I think there is plenty of room for both the customer base and the amount each customer spends with Xero to increase.

HUB24 Ltd (ASX: HUB)

HUB24 would give me exposure to another long-term change happening in Australia.

The ASX 200 share provides investment and administration technology used by financial advisers to manage client portfolios.

What I like here is the opportunity for more wealth to move onto modern platforms as advisers look for better technology, greater flexibility, and more efficient ways to manage client money.

HUB24 can benefit as its existing advisers bring more client assets onto the platform, while new advisers provide another source of growth.

The wider group also owns businesses including Class and myprosperity, giving it technology that reaches accountants and wealth-management clients beyond the core investment platform.

Australia’s pool of superannuation and investment savings should continue growing for many years. I think HUB24 has a good chance of capturing an increasing share of the activity surrounding that wealth.

Macquarie Group Ltd (ASX: MQG)

Macquarie would be my third ASX 200 share pick.

The company has built businesses across asset management, infrastructure, commodities, energy, financial markets, advisory, and banking.

That gives Macquarie plenty of places to look for opportunities as the world changes.

Over the coming decade, enormous amounts of capital will likely be required for energy infrastructure, transport, digital networks, and other major projects. Macquarie has spent decades building the expertise and relationships needed to participate in those areas.

Its earnings can be up and down, and some years will inevitably be much stronger than others.

But if I were forced to ignore the share price for 10 years, that would bother me less. I would be backing Macquarie’s ability to keep finding attractive opportunities and allocating capital effectively over a full market cycle.

Foolish takeaway

A 10-year restriction would change the way I thought about buying ASX 200 shares.

Short-term catalysts would become far less important. I would spend much more time asking whether the business could still have a larger customer base, stronger competitive position, and higher earnings a decade from now.

For Xero, HUB24, and Macquarie, I think the answer could be yes.

The post 3 ASX 200 shares I’d buy if I couldn’t sell for 10 years appeared first on The Motley Fool Australia.

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• 2 ASX shares I think could return more than Westpac
• Down 13% in a week: Is the Xero share price finally cheap enough to buy?
• Could a $1 million superannuation balance provide $50,000 a year in retirement?
• Down 54% in a year, are Xero shares now a buy, hold, or sell?

Motley Fool contributor Grace Alvino has positions in Hub24. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Hub24, Macquarie Group, and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Hub24 and Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.