On Thursday, Barclays adjusted its stance on Bayerische Motoren Werke AG (BMW (ETR:BMWG):GR) (OTC: BMWYY (OTC:BMWKY)), upgrading the stock from Underweight to Equalweight. The firm also revised the price target to €80.00 from the previous €90.00. The change in rating comes after a reassessment of the company's position, particularly in the Chinese market, where concerns about peak pricing and margins had led to a previous downgrade in September 2023.
Barclays noted that while they had initially downgraded BMW due to peak-pricing and peak-margin concerns in China, the situation has since evolved. The firm has cut its estimates for BMW's earnings before interest and taxes (EBIT) for the years 2024-2026 by 18-22%. Despite the reduction in the price target, the upgrade to Equalweight reflects the analyst's view that the current lower levels offer a more balanced risk-reward scenario, adhering to the notion that "every asset has its price."
The analysis by Barclays indicates that BMW's exposure to the Chinese market has decreased relative to its competitors. While BMW had the largest exposure to China in the fiscal year 2023, the full consolidation of its China joint venture and the sharp correction of its Chinese business have now brought its exposure below that of other major automakers as of the first half of 2024.
Barclays also pointed out BMW's strong financial position, highlighting the automaker's greater than €40 billion in automotive cash and more than €6 billion in structural free cash flow as per the new Barclays estimates. These financial metrics are seen as providing firm support for the company's stock at current levels.
Finally, the analyst acknowledged BMW's progress in integrating battery electric vehicles (BEVs) into its margins and expressed a positive outlook on the design and marketability of BMW's upcoming "Neue Klasse" range of vehicles. This new lineup is anticipated to be one of the most appealing in the industry, according to the analyst's commentary.
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