The car manufacturer was one of the winners on the stock market in the first half of the year. The mood has now changed.
(Photo: dpa)
Dusseldorf BMW shares came under pressure on Thursday due to an analyst comment. Henning Cosman from the British bank Barclays downgraded the stock from “equal weight” to “underweight”, which is equivalent to a sell recommendation. He also lowered his price target from 107.50 to 92.50 euros.
The share then fell by up to 2.3 percent to 95.06 euros. This means that it at least stayed above the recent interim low of 93.78 euros.
In his study presented on Thursday, Cosman wrote of the “fear of price normalization”. The signals for the operating profit margin in the second half of the year indicated that the margin was below that of the first half of the year. This supports the thesis of a peak in prices and profitability. Contrary to the market consensus, Cosman does not expect margins to increase in 2024 and 2025 either.
The Barclays experts are particularly concerned about developments in China. Of all car manufacturers, BMW’s net profit depends most heavily on the People’s Republic. However, Barclays economists have become more skeptical about consumer spending there due to demographic and economic developments.
“With BMW’s volume ambitions heading towards three million units, we believe BMW will not be able to achieve its volume ambitions without normalization of prices/discounts,” Cosman writes. This is particularly true in the extremely competitive Chinese market and especially when the intensity of competition also reaches the premium segment.
>> Read here: Car manufacturers are threatened with the end of “picture-perfect profits”
The Swiss bank UBS pointed out this danger at the end of August. Accordingly, BMW and its core models are in a highly competitive segment in China. They set their price target at 97.17 euros. The rating for the share was “neutral”.
China has become the decisive factor
In addition to Barclays’ downgrade, there are uncertainties regarding the EU Commission’s planned investigation into subsidies for Chinese car exports. According to the Ministry of Commerce in Beijing, the investigation into China’s electric car market will have a negative impact on trade and economic relations between China and the European Union.
This could pose risks for BMW: China has become a dominant factor on the balance sheet. Last year, around 50 percent of the new seven-series sedan alone was sold in China.
>> Read here: EU threatens China with tariffs on electric cars
According to the financial service Refinitiv, only seven of 26 analysts currently recommend buying the stock. 14 recommend holding and four recommend selling.
In the first half of the year, however, BMW shares were one of the biggest winners on the German market. The stock is currently up more than 20 percent since the beginning of the year – significantly more than the German leading index Dax.
Nevertheless, the hedge fund Viking Global Investors published a short position on the stock in mid-July, which increases in value when prices fall. It was the first short bet at BMW in four years.
Viking has now reduced the position below the reportable threshold of 0.5 percent of freely tradable shares. It is therefore not known whether the hedge fund is still betting against BMW. It would have been worth it: the share price has fallen by around ten percent since mid-July.
More: BMW boss Zipse doubts Europe’s electric car strategy