By Sam Boughedda
Goldman Sachs analysts upgraded Ferrari N.V (NYSE:RACE) from Sell to Neutral while downgrading BMW (OTC:BMWYY) from Buy to Neutral in a note to clients on the European automobile industry on Thursday.
More specifically, they focused on the topic of battery electric vehicles in the region, with the analysts telling investors that there is limited evidence of industry-leading products when considering European BEV offerings based on the overall efficiency of the powertrain.
"While there are industry-leading features, at best powertrain efficiency seems to be in line with Tesla (NASDAQ:TSLA), and in many cases still falls short," the analysts wrote. "We believe that if the European auto industry is to retain its strong standing, it will need to produce products that set new industry standards around powertrain efficiency."
As a result, they said European market share is at risk with the rapid transition towards BEVs in the region, opening the market to share swings.
Focusing on BMW (BIT:BMW), the analysts lowered the firm's price target on the stock to €109 (€1 = $1.0931) from €113.
They explained: "While the investment community has debated BMW's flexible powertrain approach, it seems consumers are appreciative of the product, with BMW's BEV sales eclipsing those of Mercedes both in absolute terms and as a percentage of BMW's total sales. However, BMW's BEV success does bear a near-term cost, notably elevated capex to catch up with the strong demand and lower relative gross margins on the BEVs themselves. Meanwhile, PPA is expected to remain elevated in both 2023 and 2024, and BMW's compact cars pricing may be at risk in the increasingly competitive Chinese market."
On Ferrari, the analysts cut the firm's price target on the stock to $260 from $283, telling investors: "Unlike other OEMs at this point in time, we see minimal near-term risk to Ferrari from a softening consumer or higher rates and believe that Ferrari's customers will remain more resilient during a period of economic softening. In addition, we believe that the recent change in regulation to allow for e-Fuel has the potential to mitigate the capex burden and de-risk the terminal value for Ferrari."