NEW YORK (dpa-AFX) - On its way to becoming a potential European champion in the online used car trade, Auto1 will have to make further substantial investments, according to the US investment bank Morgan Stanley. The SDax company will therefore probably need two to three years longer than generally assumed to reconcile growth and profitability, wrote analyst Pete-Veikko Kujala. In a study on Wednesday, he rated the share as "Underweight" with a target price of EUR 4.60. The share price fell by a good eleven percent to 5.70 euros by Wednesday afternoon.

Kujala forecasts growth for Auto1 to 6.2 billion euros in 2026, based on his estimated turnover of 5.4 billion euros in 2023, which is around 20 percent below the Visible Alpha consensus of 7.8 billion euros.

As the Morgan Stanley expert believes that a renewed acceleration of sales growth in the Autohero division - the online sales platform for small customers - is only possible with increased marketing expenditure at various levels, he believes that earnings before interest and taxes (EBIT) are likely to suffer as a result.

Accordingly, Kujala does not expect EBIT to be positive until 2027, in contrast to the analyst average (consensus), which assumes positive EBIT as early as 2025. "However, if EBIT is positive earlier, this is likely to be accompanied by slower growth," he wrote.

Auto1, Kujala believes, could one day become the "European champion in the used car trade and consolidate the industry", but not yet in 2025. The company's position in Europe is strong, especially in the Auto1.com merchant segment, the platform for used car dealers. "However, we believe that the company's valuation and consensus expectations place a much stronger focus on the new retail business Autohero." However, this currently "does not yet have such an established presence", which is why extensive advertising expenditure is necessary in the longer term.

According to the "Underweight" rating, Morgan Stanley expects a below-average total return on the share compared to the other stocks in the same sector monitored by the bank. This is based on a period of between twelve and 18 months./ck/mis/he

Analyzing institute Morgan Stanley.

Publication of the original study: 03.01.2024 / 04:30 / GMT First dissemination of the original study: Date not specified in study / Time not specified in study / Time zone not specified in study