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We maintain our price target of €74 on Daimler but change our stance from BUY to HOLD. The reasons for the change in stance is as follows:
However, we are also seeing positive improvements from the Group. This is why we recommend a HOLD recommendation on the stock. These being:
Outlook
The fact that the Group is under investigation creates uneasiness amongst shareholders that will create volatility in the shares. Since profitability is not expected to improve in 2018, this makes Daimler less attractive from a risk/reward perspective than some of its other competitors.
Having said that, if the Group is cleared from the allegations, we expect to see a large positive movement in the share price. Also, the fact that the shares are trading on a P/E of 7x, an expected gross dividend yield greater than 5% and a forecasted earnings yield of 14.5% (2019 earnings) makes it a HOLD in a well-diversified portfolio.
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