Daimler to drive high on Mercedes-Benz sales

From the low of $56.50 recorded in the first week of July, the share price of Daimler AG (OTC: DDAIF) has appreciated by nearly 20% to $69.35 as of Tuesday’s close.

The stock was least affected in the aftermath of the Brexit issue mainly due to the report of exceptional second-quarter results that beat analysts’ estimates. The Euro zone economic data, released on Monday, indicated a slowdown in the business activity (IHS Markit Purchase Managers Index for Germany declined to 52.6 in September, from 52.9 in August). This raises questions about the near-term future of Daimler AG and its share price. Based on the arguments below, we believe that the share price would continue to appreciate.

The Stuttgart-Germany based company reported a 3% increase in the fiscal 2016 second-quarter revenue to €38.62 billion, from €37.53 billion in the second-quarter last year. The Mercedes-Benz car manufacturer posted Q2 2016 net profit of €2.45 billion or €2.27 per share, compared to €2.37 billion or €2.12 per share in the Q2 2015.

Mercedes-Benz

The Asian region, which includes China, reported almost a flat growth of €8.42 billion. The revenue from China, however, grew by 4% to €3.95 billion. The Western Europe recorded a 16% growth in the revenue to €13.99 billion. The NAFTA countries, which include the US, posted a 5% decline in the revenue to €11.46 billion.

For the full year 2016, the company expects the adjusted EBIT (Earnings before Interest and Tax) to significantly increase for the Mercedes Benz Vans division, on a y-o-y basis. For the Mercedes-Benz, Daimler-Buses, and Daimler Financial Services, the company forecasts the adjusted EBIT to be slightly above the earlier year. The company also anticipates the FY16 adjusted EBIT to be significantly lower for the Daimler Trucks division.

So far, in the first-half of 2016, the company has sold more than a million Mercedes-Benz cars. Daimler expects the momentum to continue in the rest of fiscal 2016.

Overall, the Daimler AG anticipates a slight increase in the revenue and earnings compared to the previous fiscal year.

The historic price chart indicates support for the stock at 68. The 50-day moving average at 68.50 also gave support to the stock last week. The stochastic oscillator is rising in the bullish zone. This indicates that the share price would remain in an uptrend as of now.

Thus, considering the support and resistance at 68 and 76 respectively, we suggest purchasing a one touch call option to benefit from the probable appreciation in the share price. To increase the chances of success in the trade, a date in the last week of October should be selected for contract expiry. It is needless to say that the target price should be less than $76 for the advised binary option trade.

Chad Simmons

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