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On Tuesday, Citi analysts updated their position on Bayerische Motoren Werke AG (BMW (ETR:BMWG):GR) (OTC: BMWYY (OTC:BMWKY)), increasing the price target from EUR75.00 to EUR78.00, while maintaining a Neutral rating on the stock. The revision follows a review of BMW’s fourth-quarter 2024 performance, which presented mixed signals.
The company reported robust retail deliveries, which contrasted with a decline in wholesales and production numbers. Additionally, there was an increase in research and development capitalization and a decrease in provisioning. This combination of factors has made it challenging to forecast the future direction of BMW’s underlying EBIT margins going into the 2025 fiscal year.
Citi analysts recognized BMW’s strong strategic management and its impressive performance in battery electric vehicles (BEVs), particularly with the upcoming Neue Klasse model series. The company’s substantial cash reserves were also noted as a positive factor. These elements contribute to BMW being regarded as a relatively better option for investors looking to capitalize on a potential recovery in European Union manufacturing.
Despite these positives, the analysts expressed concerns regarding BMW’s significant exposure to the Chinese market, which accounts for over 30% of the company’s EBIT. With sales in China continuing to decline sharply, the analysts are skeptical about the optimistic sales growth and flat China sales projections for the 2025 fiscal year. They anticipate a roughly 2% decrease in unit sales, driven primarily by the Chinese market, and forecast an Automotive EBIT margin of 5.8%, which is below the midpoint of expectations.
The revised price target of EUR78.00 is primarily supported by BMW’s net cash position, as indicated by the analysts’ discounted cash flow (DCF) analysis. Despite the price target increase, the Neutral rating suggests a cautious stance on the stock’s immediate growth prospects.
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