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What has happened to graphics in recent months?
BMW
BMW’s share price has also been declining for years, settling at € 122 in February 2015 and then dropping below € 37 in mid-March of this year, losing 70 percent of its value during that period. It fell 44 percent from a level of 65.4 euros on February 19 of this year in a month and then jumped 54 percent from there, but it is still 13 percent lower than in mid-February.
Daimler
Daimler’s chart shows no signs of global stock market recovery in recent years, the rate is declining, from a peak of € 76 in January 2018 to € 72 by 72 percent in mid-March of this year, but Even if on April 19 of this year (roughly US Stock Markets), we look at the € 42.8 level, from which the exchange rate also depreciated over the course of a month. This has been followed by a 59 percent rebound in recent weeks, leaving the exchange rate still 22 percent lower than in mid-February.
Volkswagen
The diesel scandal left deep traces on Volkswagen’s list, while quotes peaked at more than € 250 in 2015, dropping to € 90 due to the scandal, which, while the trend increased, remained under pressure for years, including the lawsuits and fines for the diesel scandal. or even due to stricter emission standards or the costly transition to electromobility. From 170 euros on February 19, the exchange rate fell 53 percent to 79 euros in a month, and from there it recovered to almost 137 euros, which is 73 percent in almost a month and a half, but still a 19 percent below mid-February level.
What is the value of companies now?
To position German automakers globally, it’s worth looking at how much market capital companies now have. Toyota is by far the largest automaker on the market, and Tesla is moving further and further away from the Germans, slowly, almost twice the size of the world’s largest automaker, Volkswagen, and almost three and a half times the size. from BMW or Daimler, last week. There was a day when the three German automakers combined had already cost less than Tesla, with the Tesla crash late last week, the 3 Germans now have a market value 14 percent higher than the American company. .
What are the most important automotive stories?
Car sales fell
As the coronavirus epidemic became a global epidemic, car factories and car showrooms around the world closed, so not only production (over 2 million cars in the European Union decreased ) but sales fell dramatically in major automotive markets around the world for decades. There has been an unprecedented decline in the first quarter since 2006, and sales decline accelerated at the end of the quarter, while worldwide sales fell one quarter in the first quarter, a decrease of 40 percent in March, and Sales in China and Europe slowed in March.
In the next few days, we’ll get a more accurate picture of what happened in the car markets in April, which we see so far is pretty scary: Less than half were sold in the world’s second-largest car market, the United States. of cars in April than a year earlier (not all major players, Toyota sales fell 56 percent), no examples of such low sales in databases dating back to 1980, and in Italy sales Car sales practically ceased this month, sales fell 98 percent, but in France the drop was nearly 89 percent. The decrease in sales reflects the drop in purchases not only of individuals but also of companies and fleet managers.
Financial losses
Most automakers also have a serious financing business, which sells most of their cars on credit or lease, but these loans easily stop working during a crisis, and the residual value of leased cars can drop dramatically, causing that companies are as massive as they were in 2008. They can suffer losses. Preparations for this have already started, with Daimler, for example, establishing a provision of almost half a trillion euros for possible loss of funds.
State programs can come
Similarly, in 2008, automakers are now pushing to help the industry with government subsidies, encouraging potential buyers to buy new cars with various subsidies. Politicians seem fundamentally open to the idea, as the sector is a major employer, with almost 14 million jobs in the EU, 6% of all jobs are directly or indirectly linked to the auto industry and everything that can organically link to industry. VAT, registration tax, fuel tax content, etc.) is an important budgetary resource.
In China, where the auto industry directly and indirectly employs 40 million workers, subsidies and tax breaks have been introduced and expanded, but not only centrally, for the purchase of alternative cars, electric cars, hybrids, powered vehicles by hydrogen (collectively new energy vehicles). But they also benefit from state subsidies from local governments, more than a dozen cities or provinces have announced that they will support the purchase of new cars in cash, among other things, with subsidies of up to $ 1,400 per car.
In the most important European car market, Germany, a “2.0 premium crash car” is also emerging, with manufacturers trying to bring not only alternative-powered cars, but also state-of-the-art internal combustion engine models, preferably thousands of euros , in state aid, given the depth of the crisis.
What the current crisis may be different from, say, the most recent one, in 2008, is that it is conceivable that a program of remains can be launched in Europe not only by country, but also at the EU level, in the European Commission They can replace polluting cars with more environmentally friendly models, granting subsidies for purchases.
Brexin
If the coronavirus weren’t enough, the next big test could be Brexit for automakers, as European automakers won’t have tax-free access to one of Europe’s largest car markets from early next year in the absence of an appropriate trade agreement between the EU and the UK. In the absence of an agreement, cars could be exported to the UK in accordance with WTO rules, which could cost European car manufacturers 6 billion euros a year in customs costs.
Emission rules
Starting earlier this year, manufacturers in Europe will have to comply with much stricter emission standards than before, 95 percent of the fleet will be able to emit an average of 95 grams of CO2 per kilometer per car, and those who break the rule they can face severe fines. Manufacturers (in part due to the epidemic, as total sales have decreased, the proportion of electric models has increased) are highly likely to meet widely this year, it will be really critical in 2021, when they are already based on 100 percent. percent of the fleet. The twist in history is that auto companies would be easing regulations now, citing the coronavirus epidemic, and rubber manufacturers, suppliers, manufacturers and distributors have written a joint letter to the European Commission about this. Fun fact: Exactly the three German manufacturers, BMW, Daimler and Volkswagen, were left out of the initiative, saying the rules are important, there is no need to relax. And once you relax: the USA USA They have already stepped in, the Trump administration has officially withdrawn from the strict rules set in the Obama era.
What can come this year?
Now we no longer have to grope in complete darkness about how the epidemic could affect German automakers, as all three companies have released their preliminary numbers or preliminary first-quarter reports.
the BMW sales fell 20.6 percent, the crisis did not save the luxury segment either, they sold 27 percent less Rolls-Royce, the largest decline was in Asia (-25%), including China (-31%). 70 percent of American dealerships and 80 percent of Europeans have closed, and BMW factories and dealerships will continue to open in the coming weeks. The first signs of recovery are already visible in China, and BMW says the order book is strong.
the Daimler In the first quarter, it sold 17 percent fewer vehicles than last year, revenue fell 6 percent, operating profit fell 78 percent, and after-tax profit fell 92 percent. Net liquidity fell from € 11 billion at the end of last year to € 9.3 billion at the end of March this year. Daimler provided a € 12 billion line of credit during the quarter, in addition to a previous € 11 billion line of credit. Management is preparing for a difficult second quarter and a provision of € 448 million has already been reserved for possible loss of funds. The administration has withdrawn its previous expectations for 2020, they have not been able to give a specific forecast, in general they expect lower sales, income, operating profit and cash flow than last year.
the Volkswagen Vehicle sales fell 23 percent, sales fell 8.3 percent, operating profit fell 77 percent and after-tax profit fell 83 percent, and management spoke of an unprecedented crisis. Company management expects sales, revenue and operating profit to be significantly lower than last year, but the latter may be positive in 2020 as a whole. Among the risks, management highlighted intense competition, the volatility of commodity prices and currencies, and the tightening of emissions regulations.
Overall, although January and February remained strong, the March recession severely ruined the entire first quarter, with declining sales and revenue, declining operating and after-tax earnings, and management expectations for the three German automakers. Based on the second quarter it can be even uglier. Manufacturers are burning money, liquidity is generally declining (still increasing at Volkswagen), even though companies are taking massive cost-cutting measures. Manufacturers supply themselves with massive lines of credit for temporary difficulties.
How are the prices?
Since even manufacturers themselves cannot make a forecast for 2020, it’s better to look a little further and focus on expectations for 2021. Let’s start with revenue-based pricing first! By default, analysts expect that after this year’s recession, most automakers’ incomes will increase next year, and most manufacturers will already have higher incomes next year than in 2019, which is a peak in many ways. However, this is not true for German automakers, and according to analyst consensus, the revenues of the three manufacturers will be lower than last year, even next year.
Based on the market capitalization to sales ratio (P / S), there are some manufacturers whose prices stand out from the crowd (Tesla, Ferrari, Geele, Maruti Suzuki), so to examine the actions of German manufacturers, it is worth it is worth further expanding the figure on the left. Lower corner
In general, the shares of most car manufacturers are quoted at extremely low prices, usually in a P / S multiplier of 0.1-0.3, in this field the shares of German manufacturers are on average, but you can also see that with similar prices we can find many shares of companies (typically Asian) that could provide further growth in income in the coming years.
If we look at the P / S relationships forward, a BMWIt appears that the company’s stock could be bought in the March panic this year at the price it last spun at the low point of the 2008 crisis, but it can still be said to be historically cheap after the rebound.
the Daimler its price at the lowest point in March this year was well below the levels seen at the lowest point of the previous crises, but even after the price has recovered, Daimler’s shares can be bought almost as cheap as they have been very rarely in the last 2 decades.
the Volkswagen its shares traded on a P / S basis in March this year at a price as low as the last time in 2006, but after the price increase seen in recent weeks, Volkswagen has been trading at roughly the average price for the past few years. 5 years.
On a P / E basis, we also do not use the unpredictable result of 2020, but the expected profit for 2021, and here we associate the net profit margin with the P / E ratio. As with P / S based prices There are some outstanding stocks here (Tesla, Ferrari, BYD, paper from some Chinese manufacturers), so it’s worth re-enlarging the mass in the lower left corner of the chart.
On a P / E basis, the shares of German automakers are scattered in between, Daimler is more expensive, a P / E ratio of 8 is associated with a net profit margin of less than 3 percent, while Volkswagen and BMW have lower prices (6- and 7- is) provides higher profitability.
What do analysts say?
As the BMW stock price fell, more and more analysts became more optimistic about BMW shares, buy recommendations steadily increased, and the number of sell recommendations decreased. According to the latest analysis, 16 analysts recommend buying BMW papers, 11 saving them and 2 selling them.
The average price target for BMW is € 62.7, which is 16 percent higher than the last closing price.
Of the 3 stocks, Daimler is the least optimistic for analysts, with 14 buy recommendations and 14 hold recommendations and 8 sell recommendations, and analysts have become increasingly pessimistic in recent months.
The average price target is € 34.5, which is only 9.4% higher than the last closing price.
Volkswagen shares are recommended for purchase by a large majority of analysts, with 22 analysts issuing 4 shares and 2 selling recommendations.
The average price target has fallen sharply in recent weeks, but is still at € 161, 26% higher than last week’s closing price on Thursday.
How does the technique look?
the BMW its share price rose to a critical level late last week when it reached the upper limit of the gap it left in early March, halting the rise for the time being. It is now worth paying attention to whether the upward trend line formed by the increase in recent weeks will persist; if it falls, the exchange rate can be tested in the first round based on the € 58.5 level. Upwards, the next level is around € 64, with a support level and the upper edge of a gap.
the Daimler Similar to the technical chart, it is also worth noting if the exchange rate does not break the uptrend line from the March low. Here, the base build was at the € 27.5 level, the next stop could be at € 34.8, there is an upper edge of a gap and a major Fibonacci level as well.
With the increase in recent weeks, it has increased to significant levels of Fibonacci Volkswagen Exchange rate, rejected from there at the end of last week, and has fallen further today. Here, the construction of the base was 116 euros, down to the level worth seeing, and upwards there are interesting levels of 4-6 euros, which are marked by gaps.
Overall, the 3 charts are very similar, on the one hand, long positions are worth thinking about while the upward trend lines persist, and on the other hand, the bases built from early to mid-April persist. If we look at longer charts, it would be premature to talk about a trend reversal, with all three stocks in a massive recession.
Cover image: Marijan Murat / image alliance via Getty Images
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