Mercedes-Benz Draws Buy Ratings From Deutsche Bank and DZ Bank, but the Cars Margin Holds the Verdict
Published on 11/04/2026 at 12:01 | Editorial boerse-global.de
Two bullish broker notes landed on Mercedes-Benz within days of each other this week, yet neither settles the question that matters most to shareholders: whether the carmaker can turn its thin profitability around. Deutsche Bank initiated coverage on Monday with a "Buy" rating and a €65 price target. DZ Bank, for its part, trimmed its fair value to €48 from €55 on Friday while keeping its "Kaufen" — buy — recommendation.
The split between a fresh target of €65 and a cut to €48 captures the tension running through the investment case. A buy call is a valuation signal, not proof that earnings have bottomed out. Analyst Michael Punzet at DZ Bank tied his lower fair value to persistent weakness in China and to the profit warning issued roughly a week earlier, even as he acknowledged that the quarterly figures had slightly beaten expectations.
A 15% Profit Slide Sets the Bar
The backdrop is a difficult third quarter of 2026, in which adjusted group EBIT fell 15% to €1.78 billion. Management blamed the downgrade on a tougher market environment in China and higher costs in the fourth quarter, including elevated material expenses. Against that, an optimistic scenario needs more than a cheaper multiple — it needs a credible path to rising earnings.
Mercedes-Benz Cars now guides for an adjusted return on sales of 2% to 3% in 2026, down from a previous 3% to 5%. That range is the yardstick investors should watch. It shows how much of revenue is expected to survive after adjusted operating charges, and it is the number on which any recovery thesis will be tested first.
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How sensitive expectations have become was underlined by Jefferies on 28 October. Analyst Philippe Houchois flagged risks to 2027 market forecasts should the cars margin come in at around 1.5% — a risk scenario, not company guidance. Jefferies nonetheless reaffirmed its buy rating and €46 price target the same day, showing that upbeat recommendations and serious operational reservations can sit side by side.
Cash Generation Emerges as the Harder Test
While the margin draws most of the attention, the industrial free cash flow may be the more revealing gauge. It reached just €172 million in the third quarter of 2026, and Mercedes-Benz expects a full-year figure well below the prior year. That single metric bundles the question of whether the operating business can again generate dependable funds.
A better-than-feared quarter does not erase that uncertainty. Beating lowered expectations is not the same as improving on last year, and investors would be wise to separate the two. What would count is evidence that earnings and cash flow are stabilising together — a lone encouraging number would not be enough.
Group EBIT for 2026 is projected at the prior year's level, so both the earnings line and the cash inflows remain under pressure. A strategic answer to the China dependence, in other words, would not automatically deliver a short-term earnings boost.
Strategy Review and Annual Results Loom
The next concrete reference points are the annual results in February, which one analyst expects to focus on China and investment, and a broader strategy update planned for 2027 looking toward 2030 and beyond. According to Reuters, chief executive Ola Källenius intends to keep China as a strategic pillar while making Mercedes-Benz less dependent on the country as a profit source. Whether that ambition translates into tangible measures and a convincing earnings outlook is what shareholders will judge.
One analyst, Hummel, cut his price target to €42.50 from €45.00 while confirming a neutral rating — a reminder that not everyone on the sell side shares the bullish stance. The February results are an analyst expectation rather than a confirmed company announcement, so the timing of any strategic detail remains uncertain.
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What Would Vindicate the Bulls
The positive case does not demand a swift return to earlier ambitions. It would gain conviction simply if the burdens stop worsening and the company lays out a comprehensible route to better profitability — if the pressure on results can be contained rather than becoming entrenched. Stability within the new 2% to 3% range, paired with an improving industrial cash flow, would lend the constructive ratings real substance.
The bear case rests on the same margin. Should the cars profitability stay weak, the risks Jefferies described for 2027 forecasts could materialise, and a recovery would be more than merely delayed — investors would have to question whether their assumptions about future earning power still hold. A combination of market-side and cost-side strains means that stabilisation in one area could prove insufficient if the other deteriorates further.
For shareholders, the takeaway is that a single price target matters less than the trio of dependable results, stronger cash generation and a convincing strategic response. Until the strategy update and the February figures provide clarity, the decision remains a weighing of possible stabilisation against the risk of prolonged earnings weakness — with the cars margin, not the broker notes, as the truest measure.
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