Semiconductor shortage still poses risks
Bayerische Motoren Werke AG (BMW Group), which roughly translates to Bavarian Engine Works Company, is a German automotive company that produces and sells cars and motorcycles around the world.
BMW’s roots go back to 1916, with the merger of two engine manufacturers. The famous company emblem, which reflects the blue and white colors of the Bavarian state, has appeared on products since 1917.
Today, BMW is a flagship brand associated with luxury. It owns the brands BMW, Rolls Royce and MINI. In 2020, the company was the 10th largest automaker with 2.7% global market share, according to data compiled by Statistical.
But despite the company’s success, BMW stock, which is listed on the German DAX 40 index, has yet to regain the highs it reached in 2015. Even with its leading position in the market, the automaker German has not escaped the problems caused by the pandemic. , like the semiconductor shortage that has plagued most auto and tech companies over the past year.
The pressing question for investors is: can the luxury car maker recoup those 2015 highs?
BMW share price analysis
BMW stock posted a strong performance in 2021, satisfying shareholders with a strong year-to-date 18% return, slightly above the 12.8% return on the DAX 40.
The stock hit an annual high of € 96.39 ($ 111.74) on June 9, before falling back to € 75.41 ($ 87.42) on August 20. Since then, price action has moved sideways higher, with the stock currently trading around € 84.5 ($ 97.98), as of September 30.
The stock has yet to recover the record € 123.75 ($ 143.5) reached on March 2, 2015.
BMW attributed this level to the introduction of new models and high customer demand.
“The two millionth car of the BMW group rolled off the assembly lines in November. And 2015 marks the fifth consecutive time that our German factories produce more than one million vehicles per year, ”said a BMW statement says.
In March 2020, in the midst of the pandemic, the stock price fell to $ 48.01 and has been rising slowly since then.
BMW’s latest earnings report
In recent BMW stock news, the company semestrial report as of June 30 has shown its profitability despite the global shortage of semiconductors. At the group level, the company posted pre-tax profit of 9.7 billion euros, down from just 498 million euros a year ago when the pandemic hit the global economy.
Profits were driven by higher sales volumes. However, BMW said the second half of the year will be affected by supply chain bottlenecks and higher prices for raw materials.
BMW says the auto segment will see a solid year-over-year increase in the BMW, MINI and Rolls-Royce ranges. The company adjusted its annual profit margin before interest and tax (EBIT) outlook to between 7% and 9% in 2021, from a previous forecast of 6% to 8%.
The direction, however, depended on the assumption that neither the pandemic nor the chip supply situation had deteriorated significantly, the company noted. BMW has warned that its second-half results could be more volatile amid semiconductor shortages, bottlenecks and high commodity prices.
The warning may have dampened investor enthusiasm, with the stock falling 5.16% after the August 3 announcement.
Challenges ahead for the German automaker
The auto industry suffered a huge blow in 2020, when the Covid-19 closures forced showrooms to close for many months. According to the Society of Motor Manufacturers and Traders (SMMT), UK new car production fell -29.3% in 2020 to 921,928 units, the weakest performance since 1984.
In his Auto Trade Report 2020, SMMT said the pandemic and Brexit were “still the biggest threat to the long-term future of the industry”. Members surveyed found that one in six jobs in the auto industry – around 24,000 jobs – were at risk of being made redundant in 2020.
But SMMT sees better things to come. “While the pandemic is by no means in the rear view mirror, the success of the vaccination program and the reopening of the UK economy means the industry can begin to refocus on recovery and future ambition,” he said he added. Sustainable development report 2021 noted.
Automakers have suffered a global chip shortage as semiconductor makers have failed to ramp up production quickly enough to meet global demand. According to the consulting firm AlixPartners forecasts, the auto industry is expected to lose $ 210 billion in revenue due to semiconductor-related shortages.
Solid-state chips are essential components in new vehicles, enabling infotainment systems and more basic parts such as power steering and brakes. Depending on the vehicle and its options, experts say a vehicle could have hundreds of semiconductors.
“Despite the short-term challenges, we remain focused on the group’s long-term strategy of leveraging our great innovative strength and sustainable profitability as the basis for successfully shaping the transformation of our industry,” said Oliver Zipse, Chairman of the Board of Directors of BMW.
“In doing so, we are committed to finding the best technological solutions to advance digital connectivity and sustainable mobility,” Zipse added in first half results. Press release.
BMW stock predictions
According to MarketBeat, BMW received a consensus rating from Hold, based on four buy notes, seven hold notes and three sell notes. The consensus price target is € 98.14 ($ 113.81), which suggests a potential rise of 16% from the current share price of € 84.5 ($ 97.99). BMW stock price predictions range from a high of € 125 ($ 144.95) to a low of € 74 ($ 85.80).
Note that predictions are often wrong. You should always do your own research before making an investment or trading decision.
Now is the time to buy a BMW?
The decision to buy BMW stock should be based on your own analysis and evaluation. You need to consider the stock price and the fundamentals of the company. Here are some reasons that may support the decision to invest in BMW.
BMW is an automobile manufacturer with over a century of experience. It is the 10th largest automobile manufacturer in the world with a market share of 2.7%.
BMW has a strong track record and its recent earnings report demonstrates its resilience to survive a pandemic, Brexit and a global chip shortage.
Is it a good time to sell BMW?
The decision to sell BMW shares should be based on your own analysis and evaluation. You need to consider the stock price and the fundamentals of the company. Here are some reasons that may justify the decision to sell BMW stock.
The BMW stock is struggling to repeat the record high of € 123.75 reached in 2015, and it’s unclear if it ever will. Additionally, the stock is currently trading below its annual peak of € 96.39 as the price action has fallen sideways since June 2021.
While the average price target suggests upside potential, the average consensus rating is “hold”, according to MarketBeat data based on the opinions of 14 analysts.
Edited by Jekaterina Drozdovica
BMW is a flagship brand with a century of automotive manufacturing experience and solid fundamentals. While the consensus price target is € 98.86 ($ 116.35), with an expected rise of 16.0%, according to MarketBeat data, the stock has a consensus “hold” rating. based on the opinions of 14 analysts.
Note that predictions are often wrong. You should always do your own research before making an investment or trading decision. And never invest money you can’t afford to lose.
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