Once the world's premier luxury carmaker, BMW was described as the European auto sector's valuation anomaly by Jefferies analysts Thursday morning, who also raised their price target for the stock to €95 from €90, helping to drive a 0.60% gain to the stock, which traded at €85.48 by 10:30 CET in Frankfurt against a 1.05% loss for the Stoxx Europe 600 Auto & Parts index.
"BMW has tuned into the sector's valuation anomaly. This feels wrong given earnings resilience in the product down-cycle, leading return on invested capital, cash conversion and highly conservative balance sheet at a time of financial services concern," said Philippe Houchois, in a note to clients.
VW, on the other hand, remained a victim of analyst skepticism after broker Berenberg criticized what it perceives as slow progress driving key structural changes, such as a reduction in staff costs and an improvement in cash flow at the core business.
"We maintain our cautious view on Volkswagen as the company has made little progress in addressing its structural issues. These structural problems will, in our view, become more visible once the top-line growth slows or declines, as VW's cost structure is less flexible than the market believes," said Alexander Haissl.
Haissl reiterated his sell rating for VW Thursday and gave the stock a €100 price target, which implies downside of 26% from current levels.
BMW shares slipped by as much as 0.53% in early trading, to change hands at 136.35, reducing its year-to-date gain to 2.55%.
Also in German car territory, the newly crowned king of the luxury auto segment, Daimler, saw its stock slip by 4% after going ex-dividend.
The Wolfsburg based firm became the world's number one seller of luxury cars last year after unit sale outpaced those of BMW, while management delivered bullish guidance for 2017 at the company's annual shareholder meeting on Wednesday.