Ferrari and 4 other companies: BofA names the best stocks in Europe's car industry for 2026

Bank of America has bet that some European automakers will be in a favorable position for price gains in 2026 thanks to a likely easing of regulatory rules, CNBC reports. The sector's relatively cheap stocks retain catch-up potential amid a possible revision of CO2 emissions regulations, according to Horst Schneider, head of sector research at BofA. The analyst predicts a traditionally strong first quarter for the sector, followed by a correction and a new upturn by the end of the year.

BofA sees Ferrari as a key investment idea in the European auto industry for 2026. Although the luxury sports car maker has faced valuation revisions and lagged the market recently, the current discount provides a "very good" risk/reward ratio in the Italian company's securities, Schneider noted. The analyst said Ferrari is acting "deliberately cautious" in preparation for the launch of sales of its first electric car in October 2026. He expects to raise forecasts for the five-year plan in 2027-2028, and also notes that the trend toward easing automobile emissions regulations in Europe will allow the company to launch more projects with internal combustion engines (ICE), supporting business margins.

The value of securities in the automotive sector remains low: many companies are trading at single-digit P/E multiples, stated a BofA analyst. Shares of auto giants Volkswagen and Renault are valued by the market at only four to five times annual earnings, remaining among the cheapest in the industry. Schneider attributes this to the fact that current quotes are based on the scenario of a complete ban on internal combustion engines and the inability of these companies to successfully transform themselves into electric car manufacturers. However, the relaxation of CO2 emission regulations improves the outlook for their survival: if market expectations change from a complete collapse to a partial reduction, multiples could rise.

Among other ideas, Schneider noted German tire giant Continental, which could pay a large dividend if it sells its €5 billion ContiTech auto parts division. The BofA analyst also highlighted small auto parts supplier Aumovio: after its September 2025 IPO in Frankfurt, its shares are trading at a 40-50% discount to competitors, creating an attractive entry point for investors, according to Schneider.

According to FactSet, Wall Street consensus on Ferrari, VW, Renault and Continental is now "above market" (Overweight). But the Italian brand looks the favorite here too: Ferrari securities have 18 recommendations to buy (Buy and Overweight ratings) with seven "hold" (Hold) recommendations. 15 experts out of 25 believe in the growth of Tim faster than the automobile sector, Renault - 13 out of 22, Continental - 10 out of 15. Skepticism in the market is minimal: each of the companies has only one advice to sell shares (Sell or Underweight).

This article was AI-translated and verified by a human editor