Significantly elevated Berenberg price target for Continental shareholding
Straight-Up Scoop: Berenberg Bank Bumps Up Continental's Price Target - But Wait, There's More
Here's the lowdown on the latest for automotive supplier Continental. Berenberg Private Bank has given this company a serious financial boost, jacking up their price target from 59.00 to 68.00 euros! But despite the encouraging forecast for the auto biz, their overall rating remains "Hold." The reason? Old inventory levels continuing to weigh down free cash flow - something that disappointed in Q4 of last year.
What's Happening With Continental?
In their preliminary results, Continental's free cash flow missed expectations big time! Instead of the predicted 600 to 800 million euros for 2022, they're now forecasting a mere 200 million. Despite expanding their businesses in 2022, they've been feeling the squeeze thanks to high costs.
Earlier this month, Jefferies followed suit, downgrading Continental from "Buy" to "Hold" and slicing their price target from 83 to 70 euros.
On January 20, 2023, Continental's stock was trading between 60 and 61 euros. But today, it's showing a 0.6 percent increase, moving just over the 64.00 euros mark.
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The Inside Scoop on Continental's Financials
While specifics from the banks aren't directly mentioned, let's talk about some key points related to Continental's financial situation:
- Free Cash Flow: Continental's reported increased adjusted free cash flow last year compared to previous quarters, and projects a positive outlook for the full year.
- Consolidated Sales: The company anticipates consolidated sales to land between $21.11 billion and $22.73 billion for 2025, following the spin-off of their Auto division.
Spin-off Impact
- Auto Division Spin-off: The split is expected to moderately increase leverage but could lead to stronger cash conversion in the long run.
- Financial Ratios Post-Spin-off: Projected financial ratios show an improvement in FFO to debt and FOCF to sales after the separation, with a positive outlook for the FOCF to debt ratio.
- S&P Global Ratings: After the spin-off, S&P Global Ratings expects Continental to maintain a strong financial position with adjusted FFO to debt above 30%.
- Tire Focus: Placing greater emphasis on their tire operations, which are considered more profitable, is expected to improve cash conversion and overall financial health for the company.
So there you have it! While Berenberg Private Bank and Jefferies haven't shared specifics, the future looks promising for Continental with improving cash flow, the anticipated spin-off, and a strategic focus on lucrative tire operations. Stay tuned for updates! 🚀🚗💰
- Despite Berenberg Private Bank's increase in Continental's price target, the auto industry company continues to struggle with high costs and ongoing inventory issues that impact free cash flow, as demonstrated by missing predictions for 2022 free cash flow.
- In the finance sector, both Allianz and Munich Re are projected to sustain robust growth in 2023 while maintaining steady dividends, offering potential investment opportunities.
