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BMW stock outlook dims with braking issue and China weakness, says Deutsche Bank

EditorEmilio Ghigini
Published 11/09/2024, 06:44 pm
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BMWG
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On Wednesday, Deutsche Bank (ETR:DBKGn) adjusted its price target for Bayerische Motoren Werke AG (BMW (ETR:BMWG):GR) (OTC: BMWYY (OTC:BMWYY)), lowering it to EUR90 from the previous EUR115, while maintaining a Buy rating on the stock.


The revision follows BMW's announcement on Tuesday that it would reduce its full-year margin outlook from the "lower end of 8-10%" to 6-7%. The downgrade was prompted by a halt in vehicle deliveries due to a braking issue, which BMW attributed to a component supplied by Continental.


Continental confirmed their part in the issue, which has been known since March, but the impact appears more significant than initially expected, with BMW now estimating that 1.5 million cars are affected, compared to the 370,000 previously discussed. Despite this, Continental believes that the provisions they have set aside, amounting to a double-digit million euro figure, will be adequate to cover the costs.


BMW also cited a persistent slump in demand within the Chinese market as a contributing factor to its revised forecast. This news has heightened market concerns that other companies might issue profit warnings during the second half of the year. However, the timing of BMW's announcement, not even halfway through September, is considered atypical, as it is a crucial month for third-quarter performance.


Despite the broader market apprehensions, Deutsche Bank's analyst suggests that the current issues may be specific to BMW and does not anticipate widespread warnings from other companies until later in the fourth quarter. The situation has raised alarms about the potential for more widespread repercussions as the industry heads into the summer break.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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