Stockchase Opinions

Thomas George Bayerische Motoren Werke AG BMW-GR TOP PICK Jun 12, 2018

It is post-generational. Everybody wants one. They have a great suit of electrics. It is a play on the upper middle class. (Analysts’ target: 97.63).

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Stock price when the opinion was issued

Automotive
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It is at its leanest from an operating efficiency point of view. They invested a lot to move to electric vehicles. They have a great Chinese partnership that should grow. It is a great way to play the recovery. (Analysts’ price target is $47.00)
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The traditional car makers have finally made moves to catch up to Tesla. In one of the best positions to benefit from cyclical and secular trends. Margins are improving, leading to a higher stock multiple. Yield is 2.30%. (Analysts’ price target is $84.65)

PAST TOP PICK

(A Top Pick Mar 24/21, Up 15%) Still bullish. Shares were flatlining since 2015 as the auto industry slumped, but recently the Tesla and EV cloud has lifted a bit. BMW is now planning to move into EVs as margin outlook improves.

TOP PICK
All European auto makers were under pressure from the diesel scandal of a few years ago, plus pressure to move to electrification. Very attractive lineup of EVs. Sees 50% upside, as it's so cheap compared to the market. Yield is 2.18%. (Analysts’ price target is $52.00)
DON'T BUY
They've done a good job getting customers to buy up their product chain. BMW boasts good margins vs. peers. But it's difficult for a traditional carmaker to transition to e-cars, due to all the new parts. BMW designs better cars whereas the Volt is not attractive (though Tesla is). This transition will be tough.
HOLD
40-45% ownership by one German family gives it stability. Free cashflow yield of 16%, trades at 6x earnings, not expensive. Slowdown of core business in China could make for tough quarters, plus tricky transitioning to an EV company. Yield is 6.8%.
PAST TOP PICK
(A Top Pick Nov 23/21, Down 26%) Ukraine/Russia conflict impacting European stocks. Will continue to hold stock. Very high dividend yield.
DON'T BUY
Some of the best margins relative to others. Family ownership lends stability. Hard to run both combustion engine and EV businesses. Needs to transition, but combustion is where all the profit comes from. Good at building loyal customer relationships.
TOP PICK

Trades at 6x earnings. Even through pandemic, increased production and sales slightly. Upper-end brand name. Consumer's down and so is China, but you'll see activity once that turns. Wealthy in China are still increasing, and that's a big market for them. EV offering is better than TSLA's. Yield is 7.26%.

(Analysts’ price target is $44.70)