Stifel sees potential for positive shift; upgrades Volkswagen to Buy

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Stifel sees potential for positive shift; upgrades Volkswagen to Buy
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Stifel upgraded German automaker, Volkswagen (ETR: VOWG_p ) to a Buy rating (From Hold), maintaining their 12-month price target of €149.00 (€1 = $1.0647) on the stock.

VW is currently grappling with structural obstacles and experiencing shortcomings in its corporate governance. Nevertheless, Stifel believes that there is potential for a positive shift in the company's narrative in the coming months.

Analysts are expecting to receive more information about the €10 billion cost-saving initiative in October or November. Additionally, the forthcoming electric vehicle launches will be based on the new PPE platform.

It is also worth noting that the average age of VW and Audi brand portfolios has reached its highest point, and the workforce's average age at VW is on the rise due to natural attrition.

VW's CFO anticipates a challenging period over the next 2-3 years as the company concurrently invests in EVs and Internal Combustion Engines. The IFO index for OEMs has reached a historic low, indicating a tough environment. Order intake remains weak, and there's a notable discrepancy between the current consensus for 2024 and the reality on the ground.

VW has underperformed the sector by 21% year-to-date and by 30% over the past year. Negotiations between management and labor unions regarding cost reductions are at a crucial stage, with Stifel expecting results to emerge in October or November. During this critical period, poor developments in VW's operational activities might unexpectedly be viewed as favorable news since they could potentially facilitate the company's cost-cutting initiatives.

Analysts wrote in a note, “VW is a risky call, given the long term challenges and weak order intake in the short term. However, against a record negative sentiment, 30% share price underperformance over one year and an opportunity to cut cost we upgrade to Buy.”

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