Mercedes-Benz: Tough Cost-Cutting Measures Meet Hollywood Glamour
Brad Pitt is currently promoting the AMG Coupe, but behind the facade, things do not look nearly as glamorous as they do in Hollywood. The Stuttgart-based automaker is under massive pressure and is threatening to close plants in Germany if working hours are not increased to 38 hours without compensatory pay. A sharp 8% drop in third-quarter sales, driven in part by a 31% slump in China, is setting off alarm bells on the executive board. Adding to the concerns are geopolitical issues, as political discussions are underway in the US to restrict market access for cars with more than 15% Chinese ownership. This would be a problem for Mercedes-Benz, as the passive Chinese ownership stake stands at just under 20%.
Despite the new electronic steer-by-wire technology in the EQS and record EV sales, the core business remains noticeably under pressure. According to analysts, the adjusted operating margin of the key passenger vehicle division is at risk of slipping further this year. To counter this, the group has not only relaunched a voluntary severance program but is also supporting its own share price through a share buyback program.
Trading at around EUR 40, the stock is at a 52-week low and has lost over 30% of its value since the beginning of the year. Analysts at Citi recently slashed their price target significantly from EUR 51 to EUR 42. For new investors, despite the seemingly attractive valuation, the best course of action for now, if any, is to sit on the sidelines until the operating environment stabilizes. Only the ongoing share buyback program and the company’s strong global market position in the luxury segment offer some downside protection at this “fire-sale level.”
Shifting our focus from Mercedes’ severely sputtering engine to a sector whose order books are bursting at the seams. Nevertheless, things do not necessarily look any better at Renk—at least as far as the share price is concerned.
Renk Group: Full Order Books, but Empty Margins
Anyone who believes the defense industry is a guaranteed sure thing is currently being proven wrong by the Augsburg-based transmission specialist Renk. Despite a fresh order worth over EUR 30 million from Finland for the new TRACKX vehicle, the stock is in a persistent downtrend. The stock has fallen to around EUR 36, hitting a multi-month low. The market is increasingly concerned about the sustainability of the current demand boom and fears conventional tank hardware could lose ground to drone-based systems.
The second-quarter figures are also raising questions among many investors. While revenue climbed moderately to EUR 353.59 million, earnings per share halved year over year to EUR 0.15. Analysts at Bank of America reacted promptly, withdrawing their “Buy” recommendation and cutting the price target to EUR 42.50, as they strongly doubt the sustainability of current production levels. Although the entry into the Finnish and Swedish markets opens up real potential for economies of scale in the coming years, deliveries will not begin until 2027, which entails high upfront costs.
While average analyst price targets still stand above EUR 60, short-term market momentum tells a different story. As long as the company cannot prove in its upcoming quarterly earnings report on November 5 that the margin decline has stopped, the stock remains highly speculative. Investors should wait for a clear bottom to form before investing in the company. However, this may still take some time, as the stock has recently looked more like a “falling knife”.
While Renk and Mercedes are currently navigating rough waters, a company in sunny Nevada is making investors’ hearts beat faster and exuding noticeably more optimism.
Lahontan Gold: With New Upward Momentum
The signs point to a fresh start at the legendary Walker Lane in Nevada. Canadian development company Lahontan Gold is pushing forward with the revitalization of the historic Santa Fe Mine, benefiting from already excellent infrastructure.
This flagship project boasts an updated pit-constrained resource of a whopping 2.385 million ounces of gold equivalent and is targeting a construction start in 2027. Three fresh news items underscore the project’s strong momentum: in addition to launching a 3,500 m drilling campaign at the West Santa Fe satellite project, the team reported promising results of 16.5 m at 2.72 g/t Au from the historic Heap Leach Pad Two.
The underlying business model is classically structured but effective. An excellent PEA supports the two-stage mining concept: First, low-grade oxide material will be processed via heap leaching, before the deeper sulfide ores are targeted in a second phase. Historically, 359,202 ounces of gold have already been produced here, which drastically reduces the metallurgical risk. The ongoing Sonic drilling on the old leach pads impressively demonstrates the exciting potential for extremely cost-effective reprocessing of remaining precious metals.
From a technical analysis perspective, things are also getting exciting now. The stock is trading in the lower range of the trend channel but has now developed a small, strong uptrend and is trading at around CAD 0.385. This price is still within an important resistance zone. If the stock rises toward CAD 0.43, it should break this level decisively. After that, it could move quickly toward the CAD 0.50 to 0.55 range. If this breakout succeeds, the overarching price target is CAD 0.75. This target comes from the first-wave move from CAD 0.12 to 0.50. This means that Lahontan Gold’s stock could soon gain even more momentum!
Mercedes-Benz: The automaker is battling on many fronts, including strong margin pressure, declining sales, and regulatory risks in China, so sitting on the sidelines for now may not be the worst choice. Renk Group: Despite solid long-term order prospects, weak margins and analyst downgrades are weighing on the share price. Before buying, it is essential to wait for a clear technical bottom to form. Lahontan Gold: The gold explorer is delivering strong drill results, building on a solid PEA, and currently has an interesting chart pattern that could give the stock lucrative upside potential up to CAD 0.75.
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