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Investing.com -- Continental (ETR:CONG) shares traded lower on Wednesday after analysts at Bernstein downgraded the stock to “underperform” from “market-perform,” warning that the benefits of its upcoming automotive spinoff have already been absorbed by the market.
The brokerage set a price target of €66, up from €64, representing a 14% downside from the September 1 close of €76.60.
Bernstein analysts said Continental’s valuation, at 7.3 times forward EBIT, matches tire peers Michelin and Pirelli despite still housing weaker businesses such as Aumovio and ContiTech.
“More than the entire value unlock has already occurred,” they wrote, adding that the fundamentals of both units warrant a discount relative to peers.
The note detailed a sum-of-the-parts analysis that values the RemainCo, comprising the tyres and ContiTech units, at €47 per share, and Aumovio at €19 per share, combining for the €66 target.
Bernstein argued that “both the RemainCo......and Aumovio deserve a discount to the relevant listed comps due to weaker fundamentals”.
Earnings expectations were also reduced. Reported EPS is forecast at €5.28 for 2025, down from an earlier €5.42, before recovering to €6.38 in 2026.
Revenues are projected to fall to €20.1 billion in 2025 from €39.7 billion in 2024, with free cash flow nearly halving to €1.8 billion in 2025 before improving slightly in 2026.
Valuation multiples reflect the pressure. The brokerage projects a 2025 P/E ratio of 14.5, up from 13.1 in 2024, with EV to adjusted EBIT climbing to 15.7 times from 11.6 times.
“We also see downside risk to promised margin expansion from structural headwinds (as well as another year of negative vehicle production in 2026),” the analysts said.
The downgrade follows a strong run earlier this year, with shares up 16% year-to-date. But since June, the stock has been range-bound near €75 after management’s targets failed to lift sentiment.
Bernstein noted Continental’s tyre margins, once above 20% and the highest in the industry, have fallen to 12%, “the lowest gap to Michelin on record”.