Does Volkswagen Stock Have Room To Grow At $35?

by Trefis Team
+25.29%
Upside
33.33
Market
41.75
Trefis
VWAGY
Volkswagen AG
Rate   |   votes   |   Share

At the current price of around $35 per share, we believe Volkswagen’s stock (OTCMKTS: VWAGY) has reached its near term potential. VWAGY stock rose by 120% from $16 to $35 between 2018 end to now, compared to the S&P500 which has increased by 66% during the same period. The company saw a sudden boost in share price after its announcements in March of rivaling Tesla in the electric vehicles segment. The company announced that it plans to build six battery factories and sell more EVs than Tesla no later than 2025. This boost was slightly offset by the continuous rise of Covid-19 cases across the world.

The company has seen revenue and earnings rise in 2019 but 2020 saw a dip due to the pandemic. Meanwhile, its P/E multiple has increased. Our dashboard ‘Buy or Sell Volkswagen’s Stock?‘ provides the key numbers behind our thinking.

Volkswagen’s revenue fell from €235.8 billion ($268.8 billion) in 2018 to €222.9 billion ($271.2 billion) in 2020. Net income margin fell from 5% in 2018 to 3.7% in 2020. In the same period, on a per share basis, earnings went down from €2.36 ($2.69) per share to €1.66 ($2.02) per share .

During the same period, the P/E multiple rose from 5.8x to around 10.3x. The P/E improved further in 2021 after its EV announcements and is currently around 18.4x.

Where Is The Stock Headed?

The global spread of coronavirus led to lockdown in various cities across the globe, which affected industrial and economic activity. This, in turn, reduced consumer spending on big ticket items like automobiles. This was reflected in sales volume which plummeted by 16% to 9.16K units in 2020 from 10.96K units in 2019.

The actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard Trends In U.S. Covid-19 Cases provides an overview of how the pandemic has been spreading in the U.S. and contrasts with trends in Brazil and Russia. Following the Fed stimulus — which set a floor on fear — the market has been willing to “look through” the current weak period and take a longer-term view. With investors focusing their attention on 2021 results, the valuations become important in finding value. Though market sentiment can be fickle, and evidence of an uptick in new cases could spook investors once again. In 2021 we expect VWAGY revenues to rise to €245 billion ($296.5 billion), up 10% y-o-y. Further, its net income is likely to rise to €12.8 billion ($15.5 billion), increasing its EPS figure to €2.54, which coupled with the P/E multiple of 12.2x and exchange rate of $1.21 to € will lead to Volkswagen’s valuation around $38 per share, which is about 8% above the current market price.

While Volkswagen’s stock has moved, and electric vehicles may be the future of transportation, but picking the right EV stocks can be tricky. Investing in Electric Vehicle Component Supplier Stocks can be a good alternative to play the growth in the EV market.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams Product, R&D, and Marketing Teams

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!