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On Tuesday, HSBC shifted its stance on Bayerische Motoren Werke AG (BMW (ETR:BMWG):GR) (OTC: BMWYY (OTC:BMWYY)), raising the stock from Hold to Buy, while slightly reducing the price target to EUR109.00 from EUR112.00. The automotive company's shares have experienced a significant decline, dropping 22% over the last three months. This downward movement comes even though BMW's first-quarter earnings largely met the consensus, with a notable overperformance in the Eliminations segment.
The upgrade reflects HSBC's assessment that market worries, particularly concerning China's pricing pressures and potential dealer compensations, are already factored into the stock's current valuation. BMW's vehicle sales volumes in China have remained relatively stable, showing only a slight year-over-year decrease in April and May. Moreover, HSBC notes that the discounts offered by BMW are comparable to those of its German competitors and are not increasing.
BMW has maintained guidance for a steady performance, which HSBC finds appealing given the recent sell-off in the company's shares. While the market has been cautious due to the aforementioned concerns in China, the analyst believes that BMW's consistent results present an attractive opportunity for investors.
HSBC's commentary also touches on the potential for margin expansion and share buybacks within the auto sector, suggesting that while other companies may have more room for growth in these areas, BMW's reliable performance stands out in the current market environment.
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