Volkswagen stock (OTCMKTS: VWAGY) has declined by close to 15% over the last month and remains down by 45% year-to-date, weighed down by a slew of factors including rising interest rates, the Russian invasion of Ukraine, and the semiconductor and the component crunch. Now, although VW reported a reasonably strong set of Q3 results last month, with deliveries growing by 10.6% versus last year, and with operating profit also rising by 64%, the near-term outlook looks slightly challenging, given the tough macroeconomic situation and concerns about the Covid-19 surge in China.
However, we think the stock looks like a decent value at current levels of about $16 per share. VW stock trades at just about 4x consensus 2022 earnings, which is even below U.S. automakers Ford and GM, who trade at about 5x earnings. While the depressed multiple is partly attributed to the muted near-term growth outlook, we think that VW has a couple of things going for it. For one, the company’s EV business is gaining traction. Electric vehicles accounted for close to 7% of deliveries in Q3 and total battery-electric-vehicles sales rose 25% year over year to 366,400 units. VW has a vast umbrella of brands that could offer consumers considerable choice while giving the company economies of scale as it standardizes its platforms, potentially helping to improve margins. VW is also focusing on backward integrating its EV operations by investing in building out its own battery plants. The company has also been taking steps to unlock value from its brand portfolio. VW took Porsche public about two months ago and there are reports that it could consider an IPO for its Lamborghini supercar brand. This could potentially help the stock as well. Moreover, there have been some positives for the European economy, with natural gas prices cooling off considerably in recent weeks. Benchmark gas futures are down by over 30% thus far in December. This could potentially help consumer spending in the region, helping players like VW.
We value VW stock at about $23 per share, which is 40% 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 Volkswagen’s business model and how its revenues are likely to trend.
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|S&P 500 Return||-6%||-20%||71%|
|Trefis Multi-Strategy Portfolio||-6%||-23%||212%|
 Month-to-date and year-to-date as of 12/23/2022
 Cumulative total returns since the end of 2016