BMW, Mercedes price targets raised at Jefferies amid strong outlook

Investing.com -- Jefferies has raised its stock price targets for BMW (ETR:BMWG) and Mercedes-Benz (OTC:MBGAF) Group (MBG), reflecting confidence in the German automakers’ ability to navigate market uncertainties. 

The brokerahe increased BMW’s target price to €92  from €85 while adjusting MBG’s to €65 from €60, citing both companies’ financial strength despite industry-wide pressures, including tariffs and shifting demand.

Jefferies analysts flagged BMW’s stronger near-term positioning, particularly with the upcoming Neue Klasse vehicle platform, which is set to launch in late 2025. 

This puts BMW ahead of MBG’s more traditional model renewal cycle, which is weighted toward 2027. 

“Our preference for BMW reflects near-term risk profile and earlier delivery of Neue Klasse late 2025 vs MBG’s more traditional model renewal weighted to 2027,” the analysts said.

The brokerage also acknowledged ongoing concerns about tariffs, which remain difficult to quantify. 

“Quantifying the risks from tariffs, effect on demand, and potential counter-measures will remain a challenge, likely past April 2nd,” analysts added. 

Despite this, Jefferies sees BMW as better equipped to handle tariff-related pressures. 

The company has already incorporated the expected impact into its financial outlook, with Jefferies noting, “BMW’s framing of sensitivity to existing tariffs on FY25 guidance confirmed a negative impact that is both material at ~100bps and manageable even if we add a reciprocal 10% against EU imports into the US.”

Both BMW and MBG are trading at historically low enterprise values, yet Jefferies remains confident in their ability to balance long-term investments with shareholder returns. 

“Existing strategies and balance sheet strength suggest to us that MBG and BMW can simultaneously fund the industry’s software/powertrain transition and remunerate shareholders in the process,” the analysts said.

BMW is currently trading at 7.4 times earnings, or 6.9 times when adjusted for PPA and cash R&D, with a free cash flow yield of around 10% and a 5.4% dividend yield. 

MBG, meanwhile, is trading at 7.3 times earnings or 9.0 times when adjusted for cash R&D, with a similar 10% FCF yield and a 5.8% dividend yield. 

Jefferies noted that the valuation discrepancy stems from MBG’s 30% non-core stake in Daimler (ETR:MBGn) Trucks.

While Jefferies raised its target for MBG, it maintained a “hold” rating, reflecting a more cautious stance.

The brokerage pointed to MBG’s exposure to commercial vans as a potential headwind. “MBG’s exposure to commercial vans creates a higher hurdle,” analysts observed.

Additionally, MBG’s positioning in China remains an area of uncertainty, as the company faces potential market normalization and growing competition. 

Unlike BMW, which is expected to benefit from a refreshed EV lineup in China, MBG’s model cycle is slightly behind.

Jefferies’ revised stock targets signal a belief in the resilience of Germany’s premium automakers, even as the sector faces macroeconomic and trade-related risks. 

BMW remains the firm’s preferred pick due to its proactive EV strategy, cost discipline, and near-term product pipeline, while MBG’s outlook is more tempered due to its exposure to commercial vans and a longer product renewal cycle.