Citi Cuts Mercedes-Benz Target as Margin Risks Rise

Key Moments

Target Cut on Weaker Margin Outlook

Investing.com – Citi reduced its price target on Mercedes-Benz Group stock to €42 from €51, warning that profitability pressures are set to intensify for European carmakers in the second half of 2026.

The bank stated that Mercedes-Benz is now expected to deliver Cars segment EBIT margins of less than 3.0% for full-year 2026. That revision follows a series of profit warnings from peers Volkswagen, BMW, and Volvo.

According to Citi, Mercedes-Benz should have adjusted its guidance when it reported second quarter 2026 results, particularly after BMW issued what the bank described as a sharp warning.

Headwinds Across Markets and Technologies

Citi highlighted several factors weighing on the earnings outlook for Mercedes-Benz and the broader sector. These include ongoing weakness in the Chinese market and a rising share of electric vehicles in the European Union, which is contributing to heightened global price competition.

The bank also cited increasing raw material costs as a drag on margins. In addition, Citi pointed to rising global and EU interest rates and declining residual values for internal combustion engine vehicles as further obstacles for the company.

Revised Scenario Analysis

Alongside the lower base-case target, Citi adjusted its valuation scenarios for the stock. The firm cut its bull case estimate to €70 from €75 and reduced its bear case projection to €30 from €40.

Citi added that any recovery expected in fiscal year 2027 could be weaker than it had previously assumed.

Despite the more cautious stance, the bank noted that a significant portion of the negative outlook appears to be already incorporated into the current share price, which it put at approximately €40.

Valuation Scenarios at a Glance