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On Wednesday, Citi analysts raised the price target for Bayerische Motoren Werke AG (BMW (ETR:BMWG):GR) (OTC: BMWYY (OTC:BMWKY)) to €75.00 from €74.00 while maintaining a Neutral rating on the stock. The adjustment comes as the firm revises its unit sales, revenue, and EBIT forecasts ahead of the Q4 2024 results, leading to a slight alteration in their FY24-26E EPS estimates. The FY24E EPS was lowered by 4%, but the EPS estimates for FY25 and FY26 were increased by approximately 1%.
The revised price target reflects the analysts’ anticipation of earnings upgrades and improved cash flow for the German automaker. Despite the updated figures, the Citi analyst expressed a tempered outlook for the near term, indicating that the optimism seen since December might diminish slightly following the Q4 2024 and full-year 2024 guidance from BMW.
Citi’s analysis pointed out that BMW’s stock remains undervalued, with the company holding over €70 per share in net cash. However, the analysts highlighted ongoing risks, particularly those associated with the Chinese market, which could impact the company’s Auto EBIT margins and EPS, especially compared to the lower second half of 2024 comparisons.
The report further suggested that unless BMW’s management can convince investors of the value of its cash position through sustained share buy-backs, the market may hold off on a more permanent re-rating of the stock. Investors are likely to wait for positive EPS momentum before considering a significant change in BMW’s stock valuation, according to Citi’s assessment. The Neutral stance indicates that while recognizing the company’s strong cash position, Citi analysts remain cautious due to the potential risks and the need for clear positive earnings trends.
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