BMW was downgraded by Citi from a ‘buy’ to ‘neutral’ due to concerns about China and Europe.
BMW’s $15 billion in cash, didn’t stop Citi from cutting its price target from $93.50 to $75 a share. On Tuesday, June 26th, BMW’s shares dropped 2.7% to $66.75 in trading Germany. GM and Ford are also facing loses in Europe, GM losing $16 billion here since 1999.
“BMW’s returns are exceptional relative to peers, and its cash flows second to none,” Citi said. “However, even for BMW, global auto markets are becoming more challenging, BMW’s model cycle is at its peak, and we believe the forecast upgrade cycle has finished.”
Citi said it will cut BMW’s 2012-2014 earnings by 20% below consensus. German economy has slowed dramatically, the UK returned to recession and the Chinese automotive market is also slowing down , including the luxury branch. Infiniti already announced big discounts in China to be able to sell its cars.
“We believe China’s annual car sales development is well ahead of where investors estimate, at 18 cars per 1,000 people, almost similar to Brazil, and German premium penetration is maturing above 7.5 percent,” Citi said.