Title: BMW Stock Has Rarely Been Cheaper Amid Pressure in Chinese Market Show: Barron's — Stock Pick / Autos (Andrew Bary) Guest: Andrew Bary (author) — quoting Matthew Fine (Third Avenue Value Fund) and Deutsche Bank analyst Tim Rokossa Date: 2026-09-04 URL: https://www.barrons.com/articles/buy-bmw-stock-price-pick-ev-china-85119885 Length: — (written article, ~5 min read) Note: Verbatim article text captured via Stephen's logged-in session (JSON-LD datePublished 2026-09-04T06:30Z). Written post — no (mm:ss) timestamps; the "At" cells link to the article (read ↗). Section label, byline, share buttons, ad markers, chart axis labels, newsletter promo and site chrome removed; wording otherwise verbatim.
AUTOS — BARRON'S STOCK PICK
BMW Stock Has Rarely Been Cheaper Amid Pressure in Chinese Market
The German luxury-car maker has an impeccable balance sheet and a great new electric-vehicle platform. Its profit margins should rebound.
By Andrew Bary
[Quote box: BMWKY — Bayerische Motoren Werke AG ADR — $23.93 as of market close September 3, 2026 · Market Cap $44.1B · NTM P/E 8.4 · Div Yield 7.1% · Beta 1.15 · 52-week range $21.40–$37.77]
Key Points
BMW European shares have fallen 35%, to 60 euros, this year amid shrinking profit margins and a weakening Chinese car market.
BMW is cutting costs, including 8,000 layoffs in Europe, and expects capital expenditure to fall to about €4.5 billion this year.
The company's Chinese auto sales fell 30% in the second quarter as domestic manufacturers like BYD gained market share.
BMW is one of the best-run auto makers in the world, and its depressed stock looks like a bargain despite shrinking profit margins and a weakening Chinese car market.
The German luxury-car maker is a leader in electric-vehicle technology with its Neue Klasse platform. A new all-electric iX3 sport-utility vehicle with about 400 miles of range is hitting U.S. dealerships this summer with a price tag as low as $61,000.
BMW's European shares have been hammered this year, falling 35%, to 61 euros. The stock is below where it stood 10 years ago. BMW's U.S.-listed shares (each equivalent to a third of a European share) with the ticker BMWKY trade over the counter for about $24.
There's reason for the tumble. In June, BMW issued a profit warning for 2026 keyed off weakness in the Chinese auto market, where domestic manufacturers like BYD are taking share from European luxury-car makers. BMW's Chinese auto sales were down 30% in the second quarter.
[Chart: BMW (BMWKY / OTC), Nov. 2024 – 2026. Source: FactSet]
The apparent fear is that BMW won't recover. That's too dire a scenario.
Investors aren't giving the company credit for its strong position in the U.S. and Europe auto markets and an impeccable balance sheet.
CEO Milan Nedeljkovic said on BMW's second-quarter earnings call on July 30 that BMW is taking "immediate, decisive action to drive necessary change" and better financial results.
The company is cutting costs—including 8,000 layoffs in Europe. It has passed the peak investment phase for its new EV platform, and is benefiting from declining capital expenditure.
A positive catalyst for the stock could come at BMW's annual capital market day in late September.
The Munich-based company could announce greater capital returns to shareholders—including a boost in its targeted dividend payout ratio from the current 30% to 40% to the 40% to 50% range.
BMW is buying back more than €1 billion of stock annually—nearly 3% of the market value—but it has the wherewithal to get more aggressive in the way that General Motors has done. Lower capex would help enable that.
"The stock is incredibly cheap, and it's particularly interesting given how well financed and well managed the company is," says Matthew Fine, manager of the Third Avenue Value Fund, which owns the shares.
"There's existential risk priced into the stock. But BMW's automotive business should produce $2.5 billion of free cash flow this year in one of its worst years in the past 20."
The company is now valued at just $42 billion, less than either General Motors or Ford Motor.
"BMW combines a credible BEV [battery electric vehicle] strategy, disciplined capital allocation, and attractive shareholder returns," wrote Deutsche Bank analyst Tim Rokossa in a client note this past week. He has a Buy rating and price target of €90, up almost 50% from the current price.
Electric vehicles represent about 20% of BMW's total vehicle sales of more than two million annually but are closer to 10% in the U.S., one of its best markets. BMW's sporty sedans and spiffy X3 and X5 sport-utility vehicles powered by internal combustion engines remain popular with U.S. buyers.
BMW is valued cheaply at 40% of book value, less than a third of annual sales of $140 billion and nine times depressed earnings per share projected for this year of about €6.5.
This year's profits probably will be the bottom—down 40% from 2025 levels. The company earnings are expected to rise to €8 a share in 2027.
BMW's core automotive business is sitting on about €16 billion ($18 billion) of net cash, or about €25 per share. The automotive unit has other financial assets, including funds at BMW's automotive lending unit, of another €45 per share. The finance unit has a book value of about €28 per share. That all totals about €100 per share, against a stock price of €61.
So, why does BMW stock trade so badly? For starters, auto makers have some of the lowest valuations in the global stock market. This reflects the industry's high capital requirements, overcapacity in many markets, low margins, tough competition, and high labor costs.
Tesla, the major outlier in the industry with a $1.4 trillion market value, excites investors more for robots, autonomous driving, and robo-taxis than its core car business. Tesla will earn little more than BMW this year and has 30 times its market value.
BMW's automotive profit margin is expected to be a near generational low of 1% to 3% this year, down from 5% in 2025 and its target of 8% to 10%.
Getting back to that target may not happen until after 2030, but margins should improve over the next few years supported by a strong U.S. market.
The company pays a variable dividend annually. Based on its payout ratio of about 35%, that could mean a dividend of €2.5 for 2026 payable in the first half of 2027 for a 4% yield. The dividend was €4.4 a share for 2025 and paid this year.
BMW is the best-positioned major European auto maker, and its balance sheet offers a margin of safety. Many investors don't like to touch auto stocks, but BMW should be the exception.
Write to Andrew Bary at andrew.bary@barrons.com