Mercedes-Benz is no longer triumphantly greeted by analysts; instead, they're applauding...
Vibin' on the German Stock Exchange: Who's Taking the Wheel?
German automotive stocks seem to be shaking things up, with a surprising shift in preference among analysts. A favourite once held by firms like UBS and Jefferies has been dethroned, and a new front-runner is stepping up to bat. So who's replacing Mercedes-Benz?
Say hello to the new kid on the block—Continental AG. That's right, folks! According to UBS analyst David Lesne, thefuture looks bright for Continental AG. Lesne's confidence is so high that he's kept a Buy rating on the stock, even setting a target price of EUR 100[2]. Admittedly, Jefferies hasn't explicitly voiced their views on Continental AG in the search results, but the shift away from Mercedes-Benz and towards Continental AG as a favored German car stock is clear based on UBS's positive stance.
BMW Gets Pipped at the Post
While BMW was a close contender for the top spot, recent findings suggest that Continental AG is ready to take the lead. Philippe Houchois, an analyst at Jefferies, upgraded the shares of Continental AG from "Hold" to "Buy," while stripping a buy recommendation from Mercedes-Benz[1]. Houchois justified the move by pointing to Continental AG's superior risk profile, specifically in terms of growth, trade outlook, CO2 compliance, and the fact that Continental AG's expenses have already peaked, as opposed to Mercedes-Benz, which is still readjusting and investing more. Similarly, UBS analyst Patrick Hummel also switched Continental AG over Mercedes-Benz as his go-to in a sector outlook for the coming year[1], emphasizing Continental AG's improved free cash flow and attractive return prospects. Remarkably, Hummel noted that the risks from potential U.S. tariffs and emissions regulations are higher for Mercedes-Benz.
Continental AG Revs its Engines
Following its promotion by Jefferies and UBS, Continental AG has seen a remarkable surge. The stock enjoyed a nearly 10% increase last week, with an additional 2% added on Monday, bringing the price to 78.54 euros[1]. Not to be outshone, Mercedes-Benz managed only about a fifth of those gains. All in all, it was a solid week for the German auto sector.
While continuous gains are still a distant vision for auto stocks—since the start of the year, they've been lagging behind in the DAX—investors can take comfort in the fact that Continental AG appears to have a slight edge in the eyes of experts. Challenges related to the mobility transition are likely to loom over next year, but for now, Continental AG seems to have the inside lane.
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Beware of Conflicts of Interest The publisher Boerse-Medien AG's management and majority shareholder, Mr. Bernd Förtsch, holds both direct and indirect positions in the financial instruments mentioned in the publication or related derivatives, which could stand to benefit from the resulting price action due to the publication[3].
The new front-runner for German car stocks, as suggested by UBS analyst David Lesne and Jefferies analyst Philippe Houchois, is Continental AG. Continental AG has been upgraded by Jefferies from "Hold" to "Buy" and by UBS analyst Patrick Hummel for the coming year, due to its improved free cash flow and attractive return prospects. It is no longer Mercedes-Benz taking the lead. Investors should consider Continental AG in their finance decisions, given its recent surges and expert endorsements.
