With Porsche IPO Around The Corner, Is VW Stock Worth A Look?

VWAGY: Volkswagen logo

Volkswagen stock (OTCMKTS: VWAGY) has declined by close to 35% year-to-date, roughly in line with other automotive majors, as the company continues to be impacted by the component supply shortage and concerns about a broader global economic slowdown. VW’s total deliveries over Q2 2022, the most recent reported quarter, fell by about 22% versus last year to 1.98 million units, as the semiconductor shortage continued to impact production. That said, strong demand is enabling VW to prioritize the sales of more expensive models and trims, helping Q2 revenues rise 3% year-over-year to 69.5 billion Euros ($71 billion) despite the decline in volumes.

Now there are signs that the semiconductor shortage could ease in the coming months helping VW to ramp up production over the second half of the year. However, there are concerns about the global economy amid rising interest rates and negative GDP growth in the U.S. over the last two quarters. Moreover, Europe could see even more pronounced headwinds as Russia recently cut off gas supplies. This could result in surging heating and electricity prices,  potentially impacting consumer spending in the region. This, in turn, could pose a risk to VW’s business, as Europe accounts for close to 40% of VW’s sales.

However, there are some positive developments for VW, as well. VW has been slowly ramping up its sales of electric vehicles, with deliveries over the second quarter growing by about 27% year-over-year. While EVs still account for under 6% of the company’s total volumes, the company is well positioned to scale this up. VW has a vast umbrella of brands that could give consumers considerable choice while giving the company economies of scale as it standardizes its platforms. VW is planning to invest about 89 billion euros (about $88 billion) into its EV and software development over the next five years while focusing on backward integrating its EV operations by investing in building out its own battery plants. In order to fund its big EV push, VW is looking to take  Porsche, which it owns 100% of, public as soon as the end of September. The company is apparently targeting a valuation of between Euro 60 billion ($59.5 billion) to Euro 85 billion ($84 billion) for the high-performance sports car maker. The listing should also help to unlock considerable value, considering VW itself has a market cap of just about $85 billion.

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We value VW stock at about $34 per share, which is well ahead of the current market price. See our interactive analysis on Volkswagen Valuation: Expensive Or Cheap? for more details. See our dashboard on Volkswagen Revenue for an overview of Airbnb’s business model and how its revenues are likely to trend.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016

Returns Sep 2022
MTD [1]
YTD [1]
Total [2]
 VWAGY Return -1% -37% -36%
 S&P 500 Return -1% -18% 75%
 Trefis Multi-Strategy Portfolio -3% -18% 225%

[1] Month-to-date and year-to-date as of 9/7/2022
[2] Cumulative total returns since the end of 2016

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