On Thursday, Citi analyst Harald Hendrikse updated the financial outlook for Mercedes-Benz (OTC:MBGAF) Group (MBG:GR) (OTC: DDAIF), increasing the price target to EUR 60.00 from EUR 56.00, while maintaining a Neutral rating on the stock. The adjustment follows a pre-closure call on Q4 2024 earnings that was more favorable than expected.
The analyst noted that European automotive stocks are currently not in favor, citing upcoming challenges such as potential earnings declines in the second half of 2024 and risks associated with EU CO2 regulations for fiscal year 2025, which are expected to be rescinded, and U.S. tariff policy risks that are believed to be overstated. Despite these headwinds, Hendrikse pointed out that investors might be overlooking some positive developments at Mercedes-Benz, which could gain more attention if the news flow turns more positive.
With the fiscal year 2024 results and the fiscal year 2025 earnings guide on the horizon, along with a new strategy Capital Markets Day scheduled for February 20, 2025, there are expectations for a solidification of FY25 earnings per share (EPS) forecasts, potential upside to fiscal year 2026 estimates, and the possibility of increased cash returns to shareholders. These factors have contributed to the recent performance of Mercedes-Benz’s stock.
However, the analyst also mentioned that underlying trends, especially in the Chinese market, continue to present challenges. Despite these obstacles, Citi reiterated its positive short-term trading call on Mercedes-Benz shares, anticipating a possible buy-back in fiscal year 2025, which has led to the raised price target.
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