Mercedes-Benz Shares Make Golden Cross as Bullish Run Continues

Mercedes-Benz shares (XETR:MBG) are exhibiting strong bullish momentum, marked by a ‘golden cross' formation on the daily chart, suggesting potential for further gains. The stock is currently trading 1.62% higher today, extending a rally that has seen it climb 28% since April's low, with a year-to-date increase of 11.7%.

The recent price action reflects a confluence of factors impacting market sentiment towards the German automaker. The ‘golden cross,' a technical indicator where the 50-day moving average crosses above the 200-day moving average, is often interpreted as a sign of a new bullish phase. Today's gains build on a positive trend that has seen Mercedes-Benz outperform many of its peers in recent months.

Underpinning this bullish sentiment are several key developments. Most recently, DZ Bank upgraded Mercedes-Benz Group's stock rating from “hold” to “strong-buy,” indicating increased confidence in the company's financial prospects. This upgrade provides a counterpoint to an earlier downgrade by Royal Bank of Canada to “hold,” highlighting a mixed but increasingly positive consensus among analysts tracking the stock.

The company's strong financial performance in the latest quarter has also buoyed investor confidence. Mercedes-Benz reported better-than-expected margins in its core automotive business, with a car division return on sales of 4.8%, exceeding the average estimate of 3.9%. Furthermore, the company generated an exceptional free cash flow of €1.4 billion, which is expected to accelerate its planned share buyback program of up to €2 billion. This capital allocation strategy signals management's belief in the company's intrinsic value and its commitment to returning value to shareholders.

Strategically, Mercedes-Benz is also expanding its manufacturing operations in the United States. Plans are in place to add production of the popular GLC compact crossover utility vehicle to its Alabama plant by 2027. This move is aimed at mitigating the impact of potential tariffs on imported vehicles and strengthening the company's presence in the crucial U.S. market. This investment reflects a long-term commitment to the region and a proactive approach to navigating potential trade barriers.

In other strategic moves, Mercedes-Benz's pension trust has announced plans to sell its 3.8% stake in Nissan Motor, valued at approximately $346 million. This divestment is part of a broader effort to streamline the company's portfolio and focus on core operations. The proceeds from this sale could be redeployed into strategic investments or further enhance shareholder returns.

The formation of the golden cross on the daily chart provides a technical indicator supporting further upside, but it remains important to be aware of the potential risks stemming from geopolitical and macroeconomic factors.