Share BMW: the next stage with the potential of billions |  Motley Fool UK

Share BMW: the next stage with the potential of billions | Motley Fool UK


Actually, I’m not a big fan of that bmw– Share (WKN: 519000). In my opinion, the people in Munich often failed to follow the electric path after the very innovative i3. Now the automaker is chasing the competition. When it comes to another future topic, software, BMW seems to be in a better position than many of its competitors.

Now the Munich company takes another important step towards the future when it comes to software, which opens up potential benefits for millions. BMW stock could benefit from this.

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BMW relies on registration

For several years, BMW has been experimenting with software upgrades, either through one-time purchases or subscriptions. Now the automaker has its own ConnectedDrive Store added more options.

Steering wheel registration and seat heating have attracted special attention. Owners of some BMW models can now, for example, fire back and forth for 17 euros per month. If you want to commit to that feeling of comfort for a year, three years or forever, you can get a discount.

The customer benefits from customization options because they don’t have to pay for functionality they don’t really need. Especially in the summer, for example, only a few customers will use their seat heating. For us investors, however, the gains in BMW stock are more exciting than the benefits to the customer.

Million profit potential for BMW stock

At first glance, it may seem absurd to put hardware in some idle cars and thus monetize it. However, BMW shares could benefit from increasing subscription sales.

Besides the potential for increased demand from customer benefits, subscriptions make a company’s revenue streams more predictable. of Adobe-Aktie (WKN: 871981 ), for example, has a higher price-earnings (P/E) ratio than BMW stock because the software company relies heavily on conventional sales. With digital services, BMW can also be a subscription-driven software company.

The higher costs that may arise from not monetizing seat heating in some vehicles should be reduced by less complexity and thus greater efficiency in production.

BMW Share: An exciting prospect for the future!

I expect that in the future automakers will offer high-performance driving without hesitation as well as entertainment offers such as sports or streaming for modest subscription fees.

However, investors in BMW stock should be careful that their company does not start charging registration fees for such mundane things as using left turn signals. Currently, such a subscription already exists for updated maps and live traffic information. For me personally, that is already at the limit.

But the possibility of future subscriptions is increasing. Because by the end of this decade, BMW will have brought an eight-digit number of connected cars on the road. Most of them will take at least one registration. For BMW stock, this means billions in sales and operating margins previously known only from the software industry. By classification: Adobe is more than 36%.

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Christoph Gössel does not own any of the shares mentioned. The Motley Fool owns shares and recommends Adobe Inc. The Motley Fool recommends BMW and recommends the following options: long January 2024 $420 calls on Adobe Inc. and a short term January 2024 $430 call on Adobe Inc.