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Investing.com – Goldman Sachs downgraded Mercedes Benz ( OTC: ) Group AG ( ETR: ) to “neutral” from its previous “buy” rating, citing the company’s strong luxury vehicle sales and maintenance challenges. Income speed.
The note on Tuesday highlighted structural and cyclical headwinds affecting the automaker’s performance.
According to analysts, Mercedes-Benz’s fourth-quarter performance showed a modest improvement in its share of vehicle sales, rising to 15.9 percent from 14.2 percent in fiscal 2024.
However, there is still concern about the continuation of this growth in 2025, especially considering the aging of the S-Class and the adoption of certain AMG models.
The note also emphasizes that the revenue from China and the large surplus from battery electric vehicles pose a risk to the company.
Goldman Sachs forecasts a 40% decline in adjusted earnings before interest and taxes for Mercedes-Benz Cars in fiscal 2024, and a further 14% decline in 2025.
Analysts attribute this decline to market volatility, pressure from electrification and challenges related to achieving CO2 compliance.
While the company’s industry-leading free cash flow is expected to remain stable, thanks to disciplined investments and cost management, the luxury automaker’s immediate earnings potential appears to be sealed.
Mercedes-Benz Capital Markets Day 2018
Key areas of focus include improvements to the luxury strategy, medium-term profit targets and advances in partnerships such as NVIDIA (NASDAQ:) for advanced driver assistance systems.
The analysts revised their price target to €59, a 6.4% increase from the current trading level of €55.45.
He noted that this assessment will contribute to uncertainty in end markets and revenue from China, with a 5.5-fold decline in revenue in fiscal year 2026 showing cautious optimism.
While he recognizes Mercedes-Benz’s unique luxury strategy, Goldman Sachs sees the short-term challenges as significant enough to downgrade them to a “neutral” rating.
The brokerage advises investors to keep an eye on key product segments in China, electric vehicle penetration and changes in the market for potential changes in the company’s fortunes.
