On Thursday, Citi reaffirmed its Sell rating on shares of Bayerische Motoren Werke AG (BMW (ETR:BMWG):GR) (OTC: BMWYY (OTC:BMWYY)), with a consistent price target of EUR74.00. The decision follows BMW's recent warning, which reflects broader negative trends within the automotive industry after a peak year in 2023. BMW's updated forecast for its Fiscal Year 2024 (FY24) Automotive EBIT (Earnings Before Interest and Taxes) margin now aligns more closely with previous non-recessionary trough levels.
The automotive giant has faced challenges, including a recall and stop-sales directive due to issues with braking systems. These problems have contributed to the reassessment of BMW's financial outlook. Despite these setbacks, there's a potential for BMW's FY25 Automotive EBIT margins to exceed the newly guided levels for 2024, assuming favorable conditions outside of China and absent a recession. This outlook has not been projected since the COVID-19 pandemic.
Citi's analysis indicates that while BMW's valuation appears more attractive than before, now trading below its net industrial cash and its financial services equity valued at €26 per share, it is still premature to conclude that the company's Earnings Per Share (EPS) momentum has reached its lowest point. The analyst also notes the persistent downside risks in the Chinese market, which could impact future performance.
BMW's recent guidance update and Citi's reaffirmed Sell rating highlight the ongoing pressures faced by the automotive industry, particularly in the aftermath of a peak year and amidst global market uncertainties. The company's stock continues to be evaluated in light of these industry-wide challenges and specific issues related to BMW's operations.
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