Barclays has updated its outlook on Porsche Automobil Holding SE (PAH3: GR) (OTC: POAHY), downgrading the stock from Equalweight to Underweight and adjusting the price target to €35.00 from the previous €42.50.
The revision reflects concerns over the company's investment strategy and its potential impact on shareholder returns.
The change in rating is based on apprehensions about Porsche's allocation of funds. Specifically, there is a preference among investors for the company to prioritize dividends and debt reduction over additional investments in its core business or portfolio.
The firm's current appeal, according to the analyst, lies in the opportunity to invest in Volkswagen AG (OTC:VWAGY) and Porsche AG (ETR:P911_p) at a significant discount, with the expectation of a total return yield through dividends and deleveraging.
The analyst from Barclays pointed out that investor feedback indicates a general reluctance toward Porsche to make further portfolio investments. Instead, there is a preference for the company to continue reducing debt or to initiate buybacks, the analyst noted.
The new price target set by Barclays suggests that there is approximately a 15% potential downside to the current share price levels of Porsche Automobil Holding SE. The downgrade to an Underweight rating is supported by these expectations and the perceived risk to shareholder value should the company deviate from the preferred financial strategies.
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