Bernstein downgrades Continental stock to Underperform ahead of spinoff

Bernstein downgraded Continental AG to Underperform from Market Perform, despite a slight price target increase to EUR66.00, ahead of the September 2025 spinoff of its Aumovio automotive unit. The firm argues that the market has already priced in the anticipated value creation from Continental's transformation into a focused tire and rubber industrial goods business, noting its current 7.3x EBIT multiple matches pure-play tire peers even with lower-margin divisions still included. Bernstein estimates the fair enterprise value of the resulting entities at EUR20 billion, below the current market valuation of approximately EUR22.5 billion, indicating limited upside.

Analysis

Bernstein has downgraded Continental AG to Underperform from Market Perform, citing valuation concerns ahead of the planned spinoff of its Aumovio automotive unit in September 2025. The core of the argument is that the market has already fully priced in the anticipated value creation from this corporate restructuring. This is evidenced by Continental's current trading multiple of 7.3x EBIT, which is in line with pure-play tire competitors like Michelin and Pirelli, despite Continental still including its lower-margin and more cyclical Aumovio and ContiTech divisions. Bernstein's quantitative analysis supports this cautious stance, estimating the combined fair enterprise value of the two resulting post-spinoff companies at approximately €20 billion, notably below the current market valuation of around €22.5 billion. This discrepancy suggests the stock may be overvalued, with limited upside potential leading into the separation.

Key Decisions for Investors

• Investors holding Continental AG may consider trimming their positions, as the analysis suggests the positive impact of the Aumovio spinoff is already reflected in the current share price.
• Potential investors should exercise caution, as Bernstein's valuation model indicates a fair value approximately 11% below the current market enterprise value, suggesting a lack of near-term upside.
• Monitor the valuation multiples of pure-play tire peers and any updated financial guidance for the separate entities, as these will be key drivers for reassessing Continental's value proposition closer to the September 2025 spinoff date.