BMW: A review of the business. The business is performing in line with projections for the year 2021. The business made huge profits.
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Almost going electric
The electrification plan of any automobile company you decide to invest in now is something you must take into consideration. Even to automakers, the shift to electric vehicles as the preferred form of transportation is becoming clear as more stringent environmental rules are implemented.
How is BMW performing in that regard? Well, at least not in the same manner that Volkswagen is all-in. BMW is instead adopting a more wait-and-see strategy in an effort to determine just how quickly the future will transition to electric vehicles. They have made a public announcement stating that by 2025, more than 25% of their vehicles will be electric. But use caution when using that term because BMW uses it to describe everything from hybrids to fully electric vehicles.
This tactic has benefits in that BMW won’t need to invest a ton of money right away updating its factories with cutting-edge machinery. Instead, they may adopt a hybrid strategy and produce both gasoline and electric vehicles on the same assembly line. However, if they move too slowly, they won’t be able to produce enough electric vehicles and would suffer financial loss while their facilities remain idle.
Friday will be a red day at Bayerische Motoren Werke (Updated on Sep 23, 2022)
On the final day (Friday, September 23, 2022), the price of the Bayerische Motoren Werke shares decreased by -3.76%, from 74.17EUR to 71.38EUR. It has already dropped three times in a row. The stock changed by 4.40% during the most recent trading day, moving from a day low of 71.12 EUR to a day high of 74.25 EUR. The price is down -2.9% during the last 10 days and has dropped in 6 of those. Despite declining prices, volume rose by 851 thousand shares over the previous day. This could be a forewarning, and over the next few days, the risk will likely rise a little. A total of 2 million shares were purchased and sold for about 132.73 million euros.
In the short term, the stock is near the lower end of a broad horizontal trend, which often presents a solid buying opportunity. However, a collapse through the bottom trend line around 70.47 EUR will offer a strong sell signal, and a trend change may be anticipated. Given the current horizontal trend, there is a 90% chance that Bayerische Motoren Werke stock will conclude this three-month period trading between 69.58EUR and 79.46EUR. Stocks rarely manage to go straight from the bottom of a trend up to the top, and a break in a horizontal trend is frequently followed by a significant increase in volume. Therefore, potential runners are stocks that turn up in the middle of a horizontal trend.
BMW remains committed to accelerating the uptake of electric vehicles.
This month, Bayerische Motoren Werke AG released strong first-quarter results; overall revenue rose 16.3% year over year to EUR31.14 billion, and GAAP earnings per share came in at EUR15.33.
It is significant to note that the fair market value of the current 50% interest held in BBA has a one-time impact of EUR7.66 billion on the financial results. Additionally, this enhanced the business’s earnings before taxes, which at the end of March totaled EUR12.23 billion and represented an EBT margin of 39.2%.
Compared to the robust first quarter of 2021, vehicle sales dropped by 7.8% in Europe and 9.2% in China; the good news is that sales in the US increased by 3.7%.
Another encouraging statistic is the fact that BMW sold 35,289 all-electric vehicles, a roughly 150% increase from the previous year.
BMW’s continued emphasis on accelerating the adoption of electric vehicles is contributing to solid sales momentum as demand for the BMW iX and BMW i4 rises steadily.
Additionally, the business recently revealed the BMW i7, an all-electric luxury car that demonstrates its leadership in innovation in the fields of electrification, digitization, and autonomous driving. BMW’s Nicolas Peter, the company’s CFO, stated:
We face increasing uncertainty in our business environment due to reduced economic forecasts, supply chain challenges, rising inflation, and high energy and raw material prices. Despite these difficult circumstances, the BMW Group had a successful start to 2022.
The company’s management claims that the key constraining factor, which is projected to persist through the rest of 2022, is supply chain concerns and rising raw material prices.
Due to this, the Automotive segment’s cost of sales jumped by more than 20% during the first quarter, but despite this and inflation, the company’s management predicted that full-year car sales would be comparable to last year’s.
When viewed from a fundamental perspective, BMW trades at less than four times TTM EBITDA, the firm can reduce cost pressure relative to smaller competitors while dealing with supply chain problems, and with a market capitalization of EUR51 billion, shares of this company are appropriately valued.
Value is everything.
In the current economic climate, there are many moving pieces for both BMW and Tesla, but given their high-end clients, large margins in comparison to competitors, and stable cash levels, I believe they are both designed to survive the crisis.
The only remaining question is how much investors should pay for the stocks, and in this area, I think BMW has a significant advantage. As you can see here, despite being significantly more profitable and bringing in more than four times as much revenue, BMW is only worth just more than a quarter of what Tesla is.
Over the next ten years, Tesla will undoubtedly surpass BMW in the auto industry, but I believe the price is too high, thus BMW prevails now.
What it signifies to you is that:
Are you an investor? BMW currently seems to be selling at or near its fair value, but given the possibility of future negative returns, now might be the ideal time to de-risk your portfolio. Is your present stock exposure good for your overall portfolio? And is it too expensive to hold a stock with a poor outlook? Check to see if the stock’s fundamentals have altered before deciding on it.
Are you thinking about investing? If you’ve been watching BMW for a while, now might not be the best moment to buy considering that it is currently trading around its fair value. There appears to be little gain from mispricing because the price appears to be trading at fair value. The risk of keeping the stock also rises due to the dim growth prospects. In the event that the price fluctuates below its genuine value, other significant aspects that we haven’t discussed today may help you come to a more definitive conclusion about BMW.
In light of this, it’s essential to be aware of the hazards associated if you want to conduct further research on the organization. Four red flags have been identified by our investigation for Bayerische Motoren Werke—two of them don’t sit well with us! and we urge you to look at these before making an investment.
If Bayerische Motoren Werke is no longer of interest to you, you can use our free platform to view our list of more than 50 additional stocks with a strong growth outlook.
Is BMW a worthwhile business to invest in?
German multinational corporation Bayerische Motoren Werke AG, usually referred to as BMW, makes cars and motorcycles. Because it outperforms its rivals, the company is drawing investors’ attention during this period of uncertainty on the financial markets.
Investors should keep in mind that BMW is a solid firm with a strong presence in the market while trading BMW stock. The majority of financial analysts anticipate that the price of BMW stock will increase significantly over the next several years, making it a potentially profitable investment decision.
The market capitalization of $49.58B and the total stockholders’ equity of $65.67B show that this stock is not expensive, and perhaps this is a good moment to buy BMW stock. The fact that this company has given its shareholders more than $8 billion in dividends over the last three years, and that this sum may become much higher in the future, is another important piece of information for prospective investors.
According to certain predictions, the car industry will only modestly expand over the next few years, but BMW will still be a big role. If you choose to purchase BMW shares, keep in mind that there are a number of drawbacks associated with this business.
According to a press statement from the European Automobile Manufacturers’ Association, car registrations in Europe fell by 5.7% in July and 18.9% in August. BMW’s second-quarter loss before interest and taxes was $780 million as opposed to the $2.57 billion in EBIT from the prior year (earnings before interest and taxes).
BMW CEO Oliver Zipse, though, expressed optimism that the company’s performance will likely improve in the second half of the fiscal year.
BMW sold 372,754 automobiles in Europe during the second quarter, a decline of 32%, while the first half of the year saw 121,318 units (a decrease of 29.5%) sold in the USA. China’s six-month sales only fell by 6.0% to 329,447 units over the past six months, thanks to second-quarter volume growth over the prior year.
The Covid-19 pandemic is mostly to blame, but after things have settled, the price of BMW stock will be much higher.
What investments is BMW making?
Aiming to decarbonize the metal business, Boston Metal, Solid Power, and Turntide Technologies are among the companies that BMW I Ventures invested in as part of its first foray into such sustainable investments at the end of 2019.
Is BMW having money problems?
The sanctions for conspiracy are seriously hampering BMW’s plans to dominate the luxury market.
In the past ten years, BMW hasn’t experienced a loss. Given the overall decline in auto sales, the automaker’s poor 2019 Q1 may not have come as a great surprise, but the decline in BMW’s trend line is far too severe to be explained by a slowing auto industry alone.
According to Bloomberg, BMW’s loss was mostly caused by having to set aside $1.6 billion as a legal provision to face fines from China and Europe as a result of the automaker’s alleged cooperation with rival German companies to postpone the introduction of new emissions equipment. But even if you disregard the substantial sum of money BMW had to set away, first-quarter earnings still decreased by 42%, or EUR1.1 billion ($1.23 billion).
The pricing competition BMW encountered in some regions and the expenditures it made in new technology during the first three months of 2019 are the causes of that decline. Although it’s unclear what those investments were used for, it’s understandable how cash resources may have been limited given the automaker’s commitment to collaborate with Daimler on autonomous technology and the influx of new models it recently released, including the X7, 8 Series, Z4, and upcoming 3 Series.
BMW unveiled a EUR12 billion ($13.4 billion) savings strategy that comprises reducing the number of models and speeding up the manufacture of new cars in order to return to profitability. But not all is hopeless, since the momentum BMW created through its investments may result in a surge of sales for the second half of 2019.
Nicolas Peter, chief financial officer at BMW, predicted that overall, the first half of the year will be “somewhat weaker.” Model changes that affect sales and drive up costs should be the cause of the anticipated loss in Q2 2019, but Peter stated that “We expect the second half-year to profit from the strong product momentum.”
Sales of the new 3 Series and the X7, the latter of which, according to BMW CEO Harald Krueger, is flying off dealer lots and above forecasts, will provide that impetus. If BMW can survive this difficult time, which could be made worse by escalating trade disputes between the US and China, it may be able to surpass Mercedes as the leading luxury automaker.