CON: Cost Discipline And Margin Expansion Will Drive Re-Rating Potential

Our updated fair value estimate for Continental has been reduced from EUR 100 to EUR 87. This reflects higher perceived risk and weaker top-line prospects, even as analysts highlight improving margins, stronger earnings visibility into 2026, and recent upward revisions to Street price targets as support for a still constructive long-term outlook.

Analyst Commentary

Recent Street research has turned more constructive on Continental, with a series of upgrades and price target increases highlighting improving execution, better earnings visibility into 2026, and a more favorable risk reward profile despite sector headwinds.

Bullish analysts have raised price targets into the mid 70s EUR range, signaling confidence that margin improvement and disciplined cost control can support upside versus current trading levels. These moves follow earlier target cuts that reset expectations, suggesting that the bar for delivery is now more achievable.

JPMorgan continues to emphasize an Overweight stance with a EUR 76 target, framing 2026 as a year in which auto suppliers that execute on cost cutting and cash generation should see equity value gradually re rate. Continental is increasingly being positioned within that cohort, with commentary pointing to earnings and cash flow momentum already visible in the FY25 setup.

Against a backdrop of limited global production growth, slower than expected BEV adoption, and intensifying competition from Chinese OEMs, the tone of recent research implies that Continental's self help measures and product positioning can offset macro softness. The growing cluster of Buy ratings supports the view that the current share price underestimates the company's medium term margin and cash improvement potential.

Bullish Takeaways

• Multiple bullish analysts have upgraded the stock to Buy and lifted price targets into the EUR 65 to EUR 76 range, supporting upside to our revised fair value and reinforcing confidence in re rating potential as execution improves.
• Upward price target revisions following the latest quarterly beat indicate that the market is starting to price in more sustainable margin expansion and cash generation, reducing concern that recent performance is a one off.
• Commentary that consensus expectations are well set into 2026, with potential upside, suggests that the risk of negative estimate revisions is moderating, which is typically positive for valuation multiples.
• JPMorgan's continued Overweight rating with a higher target underscores the view that ongoing cost cutting and operational efficiencies can drive steady equity value accretion, even in a low growth auto production environment.

Valuation Changes

• Fair Value Estimate reduced from €100 to €87, reflecting a moderate downgrade to the intrinsic value assessment.
• Discount Rate increased from 6.32% to approximately 7.20%, signaling a higher perceived risk profile and cost of capital.
• Revenue Growth revised sharply lower from a modest +2.1% to approximately negative 23.7%, indicating a significantly weaker top line outlook.
• Net Profit Margin raised substantially from around 5.9% to approximately 14.0%, implying a more optimistic view on structural profitability despite softer revenue expectations.
• Future P/E increased from about 9.5x to roughly 13.4x, suggesting a higher valuation multiple supported by improved margin and earnings quality assumptions.