Citi opens upside catalyst watches on BMW and Forvia

Citi has identified bullish opportunities in BMW and Forvia, highlighting an unfavorable market sentiment in the European automobile sector. In the case of BMW, analysts anticipate a potential short-covering of shares following the company's September 30 capital markets day, after observing a 90-day watch opening. Analyst Harald Hendrikse noted BMW's shares trading 38% below their year-to-date value, and trading approximately 10 euros under net cash. The expectation is that positive news could prompt an increase in buying, rather than more selling.

BMW's recent June profit warning has led to a significant reduction in full-year auto EBIT margin guidance, to 3% to 5%, the lowest level in about two decades. However, Citi believes that the adverse effects from China's earnings might be on the decline, having been consistent over three straight years. The bank predicts a recovery of at least 10 euros within a three-month period following previous warnings. For BMW, the outlook is rated as Neutral.

For Forvia, Citi has initiated a 30-day watch, anticipating potential European Commission local-content or industry-support measures. Analyst Ross MacDonald explained that the shares are trading near their year-to-date lows despite reaffirmed guidance. The debate is expected to shift towards capital returns in 2027.