UPDATE 1-Goldman sees opportunity in European auto stocks
* Raises Nokian to "buy," Michelin to "neutral"
* Keeps attractive view on the auto sector
* Expects higher returns on invested capital over 3 years
June 22 (Reuters) - European auto stocks are poised to deliver higher returns over the next three years as companies benefit from better management and a growing middle-class consumer base, Goldman Sachs said, adding Volkswagen AG , the world's second-biggest carmaker, to its conviction buy list.
The brokerage, however, lowered its target price on Renault SA, Porsche Automobil Holdings SE and Daimler AG by an average of 3 percent to reflect high market volatility and uncertainty.
The STOXX Europe 600 Automobiles & Parts index was down about 1 percent at 0800 GMT. Shares of BMW AG, Continental AG, GKN Plc, Peugeot SA and Pirelli & C SPA were all down more than 1 percent.
Goldman, however, maintained its attractive view on the sector, and forecast a 10.8 percent return on invested capital for 2012 through 2014, compared with an average of 6.4 percent over the last decade.
"The process of global economic realignment and the creation of a bulging middle class, particularly in developing economies, will deliver structurally higher average global car sales growth," Goldman wrote in a note to clients.
Volkswagen is best positioned among global car companies with its well-balanced sales footprint and potential for substantial cost savings, the brokerage said.
Goldman also upgraded tyre makers Nokian Renkaat Oyj to "buy" and Michelin SCA to "neutral," given recent share price weakness and lower raw material costs.
The brokerage also raised its price targets on Sweden's Volvo AB and Scania AB.
Shares of Nokian fell 6 percent to 28.60 euros by 0735 GMT on Friday. Rheinmetall was down 2 percent, while Fiat was up about 1 percent.
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