Volkswagen shares offer ‘compelling entry point’, says Citi
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New Volkswagen ID.4 (right) and ID.3 (left) electric cars on display at the automotive tower storage facility of German automaker Volkswagen in Wolfsburg, northern Germany.
Ronny Hartmann / AFP via Getty Images
Earlier this year,
Volkswagen
Investors have had encouraging news via an aggressive plan to transform the German automaker into a largely electric (EV) company.
Those targets included plans to build six new battery factories by 2030, and a forecast that by the same year 70% of European sales will come from electrified cars. Stocks surged in response, but from a mid-March high of around € 255, the stock has drifted lower, trading around € 211 on Thursday.
Now may be the time to take advantage of this pullback, said analysts at Citigroup, who resumed coverage of
Volkswagen
with a purchase note and a course target of € 300 ($ 366) (for both
Volkswagen
and ordinary shares).
“With stocks appearing to have returned to a more balanced trading pattern following volatility driven by the EV hype and retail investor interest earlier in the year, we see a compelling entry point for investors, ”Citi analysts Gabriel Adler and Samantha Jelley said in a note to clients Thursday.
“In our view, the market continues to underestimate the strength of fundamentals heading into 2022, and we believe VW is likely to be one of the structural winners as the auto industry shifts to electric powertrains. The team said.
The global industry “remains in the grip of an inflationary supply shock,” but the consensus continues to view Volkswagen’s earnings path with more caution than its peers, analysts said.
“While management is not as promotional when it comes to short-term earnings guidance as some competitors, we cannot believe VW’s earnings will significantly underperform those of their peers as new vehicle prices continue to increase in the market, ”the team said. Therefore, investors stand a chance of finding an “attractive entry point to beat expectations on the sell side” which they plan to increase through 2021.
Citi admitted that despite its aggressive goals, Volkswagen faces some competition with big goals. The industry is dominated by
You’re here,
while analysts were also enthusiastic about the efforts of
GM
and
Ford,
which has just unveiled an electric version of its F-150 pickup. Chinese electric vehicle manufacturers such as
NIO,
Li Auto
and
XPeng
also crowded onto the stage.
Citi analysts said that “Volkswagen’s scale and proactive approach to tackling the challenges of electric vehicles and software leaves it better positioned than its peers.” It’s like a recent restructuring, potential asset divestitures and changes in board structure indicate “a broader acceptance to be a leader in the transition and indicate that deep-rooted cultural challenges are being addressed.”