BMW stock forecast: Deliveries down, but margins are up

The German luxury car manufacturer saw off chip shortages to keep revenue high

Contents

BMW’s latest results reveal it has not let chip shortages drag down its quarterly revenue nor its future ambitions. Despite deliveries down by 12%, the car manufacturer increased its margins to keep revenue up by 4.5% year-on-year at €27.47bn ($31.7bn).

Sustainability was a key focus in this quarter’s results. BMW revealed electric and hybrid car deliveries over the past nine months have almost doubled year-on-year. The results also confirmed plans to start selling two new fully electric vehicle models this month.

BMW is a German multinational car manufacturer that specialises in luxury vehicles. Headquartered in Munich, the company was founded in 1916 as a manufacture of aircraft engines. Since then, the company shifted its focuses to vehicles with brands including Mini and Roll-Royce.

Mixed results

BMW surprised analysts with €27.47bn in revenue, higher than the €25.86bn prediction from six analysts at Yahoo Finance. The revenue was only up marginally year-on-year, by 4.5%, but it was impressive coming from a company that announced earlier this year it would sell 90,000 fewer cars in 2021 because of the chip shortage.

Problems with sales were evident in BMW’s latest set of results. It saw automotive deliveries down by 12% year-on-year from 675,592 in Q3 2020 to 593,177 this quarter. Motorcycle deliveries also slumped by 7%, to 48,999.

The car company increased its revenue by raising margins for the automotive segment, which was responsible for almost 90% of the deliveries. BMW raised its automotive margin from 6.7% in Q3 2020 to 7.8% this quarter. It justified this raise in its results because of “BMW Group’s attractive product range, strong customer demand and the generally lower availability of vehicles due to the shortage of semiconductors.”

This helped berat the €2.23bn pre-tax profit prediction from analysts surveyed by Reinfinitv, as BMW drove it to €3.42bn. Net profit was up 42.4% year-on-year at €2.58bn, revealing a strong result from the increased margins.

Sustainability pays

Another strength for the car manufacturer is its electric vehicles sales, which show it pays to be sustainable. Deliveries for fully electric and plug-in hybrid vehicles have almost doubled year-on-year, from 116,400 in the first nine months of 2020 to 231,575 for the same period this year.

However, the market is stronger for hybrid cars, as fully electric totalled just 59,688 units. Combined, the two vehicle types still only contribute roughly 10% of the 1.9bn car deliveries in the past nine months.

To boost these sales, BMW revealed two new fully electric models in the third quarter,  the BMW iX and BMW i4. The results announcement said order intake is high for both models and deliveries to customers will start this month.

The chip shortage has not stopped the car manufacturer’s technological ambitions, despite admitting it will continue to hurt supply into 2023. Oliver Zipse, chairman of the board of management of BMW AG, said: “The BMW iX is the innovation flagship that gives upcoming BMW models new capabilities that include 5G technology, the latest generation of software and the most advanced e-drive the BMW Group has ever developed.”

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Zipse wanted to drive home the business opportunity that sustainability can bring BMW. He said: “The BMW Group shows how profitability and transformation go hand in glove. We see technological change as a great opportunity to strengthen our business model on a sustainable basis.”

This comes after BMW revealed a concept for a completely recycled car at the IAA motor show in Munich in September. The company said this is a glimpse of sustainable premium mobility in the year 2040.

BMW’s competitors

BMW is not the only car company focusing on electric premium and will see Tesla compete for European sales. The fully-electric car company is stepping on BMW’s turf as it revealed last month that it is expecting a final permit approval for its Berlin factory by the end of this year.

Although Tesla’s $13.76 Q3 revenue is lower than BMW’s, it takes up a larger market share of electric cars. It saw 627,572 electric car deliveries in the first nine months of 2021, compared to BMW’s 231,575 deliveries.

Volkswagen also saw more electric vehicle deliveries in the same period, with deliveries up by 138% year-on-year to 293,100. Although Volkswagen’s €56.93bn Q3 revenue is much higher than BMW’s, it has been struggling with the semiconductor shortage and saw its sales decrease by 24.4% year-on-year.

The market response

BMW saw its share price drop during the pandemic from the €75 mark in January 2020 to the €40 mark in March. Since then, the BMW share price has been on a bearish trend. It was the highest it has been in over 2 years on 7 June when it reached €95.48. The share price has fallen since then but saw an upward trend at the beginning of September.

It started last month at €83.44 on 1 October and by the 1 November it had climbed to €88.08. The market responded fairly positively to the quarterly earning and closed at €89.96. As of 4 November the BMW share price is sitting around the €90 mark.

BMW price prediction

Analysts expect this gradual upward trend to continue. The Financial Times surveyed 24 analysts for their BMW stock forecast, they predicted a median target of €101. When asked about the BMW share price forecast, eight analysts recommended buying it and 11 recommending holding the stock.

The BMW stock forecast from MarketBeat is similar. 14 analysts gave an average price target of €100.93. The consensus from the majority was to hold the stock.

However, WalletInvestor’s BMW stock prediction describes it as a “not so good long term investment”. It predicts the stock will stay above €90 by the end of the year but will not hit the €100 mark in 2022. Its BMW price prediction for 2025 is to reach a high of €94.

FAQs

Is BMW a good stock to buy?

It might be. The Financial Times surveyed 24 analysts and found a median price target was €101 over the next 12 months. It was a similar consensus from the 14 analysts MarketBeat asked, who gave an average price target of €100.93. But WalletInvestor does not predict the stock to increase much more than €90 for the foreseeable future. Remember, you should always do your own research before investing as prices can go down and up.

What is the BMW stock forecast for 2025?

WalletInvestor’s BMW stock forecast for 2025 is for it to reach a high of €94. However, analysts can often be wrong so never invest more than you can afford to lose.

Should I buy BMW stock?

It depends. The Financial Times recorded 8 analysts who recommended buying the stock whilst 11 recommended holding it. The consensus from the analysts at MarketBeat was to hold the stock as well. Analysts are not always right so you should always do your own research before investing.

Further Reading

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