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Investing.com — Jefferies analysts in a observe dated Friday have revised their stance on two main German automakers, upgrading BMW (ETR:) to a “purchase” score whereas decreasing Mercedes-Benz (OTC:) Group to “maintain.”
The shift displays differing assessments of danger profiles and strategic positioning as each firms navigate challenges within the automotive trade, together with electrification, emissions compliance, and publicity to international tariffs.
Jefferies outlined that BMW’s constant long-term technique presents a lower-risk profile in comparison with Mercedes-Benz, which is present process reorganization.
This view is supported by BMW’s sturdy method to phase protection, diminished dependence on exports to China, and superior initiatives just like the Neue Klasse platform that concentrate on software-defined autos and multi-energy powertrains.
In the meantime, Mercedes-Benz is anticipated to announce changes to its luxurious technique in February 2025, flagging the continued want for repositioning.
A key consideration within the improve is BMW’s skill to keep up a extra balanced earnings profile.
Jefferies famous that BMW is much less reliant on premium-end gross sales in comparison with Mercedes-Benz, permitting it to raised climate international market shifts.
BMW additionally has a stronger foothold in electrical autos, with greater EV penetration charges aiding in compliance with EU CO2 discount targets.
By 2025, BMW wants to chop emissions by 14%, in comparison with the 22% discount required for Mercedes-Benz.
Tariff dangers additionally performed a big function within the evaluation. Each automakers face publicity to U.S. manufacturing tariffs, however Mercedes-Benz’s heavier reliance on exports to China, particularly of high-value autos, presents a higher vulnerability.
By way of funding, BMW is nearing the height of its capital expenditure cycle, positioning itself to reap advantages from its strategic initiatives beginning in 2025.
Mercedes-Benz, nonetheless, is anticipated to proceed investing closely in its realignment, probably impacting free money movement.
Whereas each firms are dedicated to distributing 100% of their annual FCF, BMW’s decrease reinvestment necessities could present extra stability.
Jefferies has raised BMW’s worth goal from €80 to €85, underscoring its confidence within the automaker’s trajectory.
In distinction, Mercedes-Benz’s goal has been revised downward from €73 to €60, reflecting the challenges of its ongoing transformation.
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