Wednesday, August 29, 2007

Wall Street says to hold DCX stock


If the Wall Street types are right, it might be wise to hold off unloading a lifetime of DaimlerChrysler stock right after the corporate divorce.

"We're strongly advising against selling any of it," said Trip Bosart, managing director for Wachovia Securities in Birmingham.

Prospects bright for Daimler

Why? Some Wall Street analysts predict the German automaker's stock could hit $100 or more.

On Tuesday, DaimlerChrysler closed at $84.34 a share -- down $1.79 or 2.08%.

General Motors Corp. closed at $29.18 -- down $1.14 or 3.76%. Ford Motor Co. closed at $7.51 a share -- down 29 cents or 3.72%.

I've heard from many readers who started out owning stock at the old Chrysler Corp. and want to sell now after DaimlerChrysler AG transferred an 80.1% stake in Chrysler to Cerberus Capital Management. DaimlerChrysler keeps a 19.9% stake in Chrysler LLC.

The current price looks good, but some analysts say it could go higher for Daimler AG -- the expected new name -- in October.

"The reality in our view is that Daimler is free of Chrysler, and its prospects look excellent," according to an Aug. 3 report by Max Warburton, an analyst for UBS investment research.

UBS has a buy on the stock and a target price of about $120 a share.

The report acknowledged that the stock market appears more cautious about Daimler's prospects. senior auto industry analyst Paul Raman issued a report Monday and upgraded the stock from a hold to a buy. His forecast includes a target of $100 a share in the next six months.

Bank of America's latest analyst report, dated July 30, is less optimistic and has a neutral rating on DaimlerChrysler stock. The 12-month forecast is $97.

Warburg Financial reiterated a "buy" on Daimler Monday. The target price: about $105.

According to, which also tracks brokerage recommendations, three analysts have a strong buy on the German automaker, two have a buy, one has a hold and one has a sell recommendation. A week ago, Zacks did not show any sells.

Japanese brands compete for Europe

There are risks, of course.

Jairam Nathan, auto analyst for Bank of America, wrote that one concern is that Mercedes could lose market share, as Lexus and other Japanese luxury brands enter Europe more aggressively.

"Mercedes products remain overpriced and could see pricing pressure if Toyota gets aggressive with Lexus in Europe," Nathan wrote.

Yet Bosart said the outlook is strong because of Daimler's expertise with diesel engines, its truck business in Europe and a potential payout or increase in the dividend.

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