Mercedes-Benz stock (OTCMKTS: MBGAF) has experienced a relatively strong year thus far, with an increase of almost 7%, outperforming the S&P 500, which has remained approximately static year-to-date. The operating environment has been challenging for the company due to decreasing sales worldwide and the effects of U.S. tariffs. So what’s going on with Mercedes stock?
Mixed Q1 Results
Mercedes has recently reported a mixed set of Q1 2025 outcomes. Revenue totaled 33.2 billion euros ($37.2 billion), down by approximately 7% in comparison to the previous year because of macro economic challenges and decreasing exports to China and the European Union. While shipments of both passenger cars and vans decreased, the company is noticing a higher proportion of more premium vehicles, such as Mercedes-AMG models. Operating income was recorded at 2.55 billion euros ($2.85 billion), a decrease of 29% year-over-year.
U.S. Tariff Impact
U.S. tariffs on automotive imports could significantly affect Mercedes-Benz. The company has recently halted its financial forecast for the year, pointing to increasing uncertainty stemming from the tariffs. Even though President Trump has signed orders intended to alleviate tariff pressure on the automobile sector, a 25% tariff remains in effect. This represents a significant obstacle for Mercedes, which imports multiple popular models into the United States, potentially making its vehicles more expensive and less competitive. The U.S. has been a profitable market for Mercedes, due to the demand for large, high-margin SUVs and also due to declining interest in electric vehicles, a sector where Mercedes has been facing challenges. To reduce tariff risk, the company announced plans to relocate production of its popular GLC SUV to the U.S., in addition to its GLE, GLS, GLE Coupe, and Mercedes-Maybach GLS that are already manufactured there. However, this transition is not expected to be completed until the end of 2027, leaving Mercedes vulnerable during the interim. The GLC is the most imported model from Mercedes, with U.S. sales increasing 58% last year to over 64,000 units.
Is Mercedes Stock A Buy?
Despite the better-than-expected earnings, we remain slightly positive on Mercedes stock with a price estimate of around $66 per share, which is about 10% higher than the market price. Although Mercedes stock trades at a relatively fair valuation of under 8x projected 2025 earnings, the short-term outlook is challenging. However, earnings per share may be bolstered by the company’s ongoing share buyback initiative. Mercedes has recently suggested a new buyback plan of up to 5 billion euros to repurchase up to 10% of its share capital. The company is also implementing measures to enhance its production efficiency, aiming for production cost reductions of 10% by 2027. Check out our analysis of Mercedes-Benz valuation for further details on the factors influencing our price estimate for Mercedes-Benz.
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