BMW stock jumps as UBS sees upcoming CMD as a positive catalyst

Investing.com -- BMW (ETR:BMWG) shares rose over 2% on Wednesday  after UBS flagged the company’s upcoming Capital Markets Day on July 15–16 as a potential catalyst, maintaining a “buy” rating and a €90 price target. 

UBS said the two-day event could clarify BMW’s strategy around the Neue Klasse electric vehicle platform and reinforce confidence in its 2025 financial guidance despite trade tariffs and weaker China sales.

UBS expects BMW to reveal key aspects of the NK platform during the CMD, including design, technology, advanced driver-assistance systems, production, and market rollout. 

The brokerage said NK remains underestimated by investors and could serve as a new technological benchmark in battery range, charging, and efficiency. 

UBS projects that an additional 100,000 NK unit sales, especially in Europe, where BMW’s current battery-electric lineup is limited, could boost automotive EBIT by approximately 5%, net of increased depreciation and amortization.

Despite external pressures, UBS forecasts BMW will confirm its full-year 2025 guidance, targeting a 5–7% automotive EBIT margin. 

UBS estimates BMW posted a 5.0% margin in Q2 and said the company remains ahead of plan in Europe. 

The impact of U.S. tariffs may also be lower than feared, due to offset mechanisms such as parts allowances. 

Even if BMW lowers its China sales guidance from flat to 10% decline year-over-year, UBS believes the margin target remains intact.

Looking beyond 2025, UBS anticipates BMW will set out a medium-term roadmap to return to an 8–10% automotive EBIT margin by 2028. 

Factors include the scaling of NK, cost-cutting measures, and a gradual decline in capital expenditures, which UBS expects to fall by €3 billion from peak 2024 levels. 

The end of China joint venture purchase price allocations in 2028, equivalent to 100 basis points of non-cash EBIT margin, should further support profitability. Improved free cash flow could sustain total shareholder returns near €5 billion annually.

UBS reiterated its €90 price target, based on a sum-of-the-parts model, and cited attractive valuation metrics. 

The forecast return over 12 months, including dividends, is 20.3%. Free cash flow yield for 2025 is estimated at 10%, and the company’s net cash is forecast to rise to €12.4 billion that year. UBS also projects a 2025 EBIT of €9.6 billion and diluted EPS of €9.61.

BMW remains UBS’s top pick among original equipment manufacturers due to its underappreciated NK potential, expected guidance confirmation, and strong cash return outlook.