On Tuesday, Citi revised its price target on Mercedes-Benz (OTC:MBGAF) Group (MBG:GR) (OTC: DDAIF) shares, reducing it to €68.00 from the previous € 72.00 while maintaining a Neutral rating on the stock.
The adjustment follows a reassessment of the long-term demand and earnings before interest and taxes (EBIT) for Mercedes-Benz in China. Additionally, Citi updated its second-quarter 2024 forecast for the automaker after a recent pre-close call with the group.
Citi's analysis included an increase in research and development (R&D) cost assumptions, anticipating that Mercedes-Benz will continue to invest in internal combustion engine (ICE (NYSE:ICE)) technology for a longer period than initially expected. The company indicated a shift towards a more flexible strategy that includes ICE models beyond 2030.
Despite a notably negative first quarter in 2024, Citi suggested that the second quarter might show improvement. However, the firm also indicated that there are few other positive catalysts on the horizon for Mercedes-Benz. This tempered outlook led to the reduction in the price target, as expressed by the firm's analyst.
The revised price target of €68.00 reflects Citi's updated expectations for the company's performance, taking into account the ongoing investment in ICE technology and the anticipated demand in key markets like China. Mercedes-Benz's first-quarter earnings were highlighted as a point of concern, but the potential for a less negative second quarter was also noted.
In conclusion, Citi's price target adjustment for Mercedes-Benz is based on a combination of factors including market demand in China, investment in R&D, and the company's earnings projections. The Neutral rating remains unchanged, indicating that Citi's outlook on the stock is neither strongly bullish nor bearish.
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