On Monday, Deutsche Bank adjusted its outlook on Mercedes-Benz (OTC:MBGAF) Group (MBG:GR) (OTC: DDAIF) stock, reducing the price target to EUR105 from the previous EUR125 while retaining a Buy rating.
The revision follows Mercedes-Benz's announcement of a reduction in its earnings guidance, a move that comes shortly after a similar profit warning from rival BMW (ETR:BMWG).
According to the company, the lowered expectations are due to decreased consumer spending in China, which has impacted sales volumes, particularly in the high-end segment.
The analyst from Deutsche Bank expressed surprise at both the timing and the extent of Mercedes-Benz's guidance cut, which exceeded 20%. The new forecast anticipates an adjusted Cars margin of 6% for the second half of 2024, factoring in a 1 percentage point negative effect from valuation changes and dynamic pricing strategies. This figure falls short of even the pessimistic scenarios, which projected margins of 8-10%.
During a conference call, Mercedes-Benz management emphasized their efforts to bolster the company's resilience in the face of these challenges. They also conveyed a cautious stance regarding future demand in China, suggesting that the market may continue to pose difficulties for the automaker.
In light of the updated guidance from Mercedes-Benz, Deutsche Bank has revised its own forecasts accordingly. The significant reduction in the price target to EUR105 reflects the analyst's recalibrated expectations for the company's financial performance in the near term.
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