On Monday, Bernstein SocGen Group maintained its Market Perform rating on Volkswagen AG (VOW:GR) (OTC: OTC:VWAGY) stock with a steady price target of EUR111.00. The assessment follows a revision in the automaker's financial guidance for fiscal year 2024, which was initially reduced on July 9.
The analyst noted that the current guidance adjustment could reinforce management's stance that significant reductions are necessary, despite opposition from the works' council.
Volkswagen (ETR:VOWG_p) had previously tempered expectations for FY24, leading analysts to forecast flat revenues and a 6.1% profit margin. The latest guidance revision underscores management's narrative around the need for substantial cuts, which are facing strong resistance internally.
The company is set to reveal its third-quarter results for 2024 on October 30. In the recent update, there was no specific mention of the performance of Porsche (ETR:P911_p), a prominent subsidiary of Volkswagen.
It is worth noting that Porsche had already downgraded its own guidance for the second half of 2024 on July 23, just one day prior to announcing its second-quarter results for the year.
The analyst's remarks hint at the challenges Volkswagen faces as it navigates through its financial planning and strategic adjustments. The upcoming 3Q24 results will provide further insights into the company's performance and the effectiveness of the management's strategies in the face of fiscal pressures.
In other recent news, Volkswagen has been the subject of significant developments and adjustments. The company's earnings report for the first half of 2024 revealed sales revenues of €159 billion and a return on sales of 6.3%, with 4.35 million vehicles delivered to customers.
Despite the remarkable progress, Bernstein SocGen Group revised its price target for Volkswagen shares, reducing it to EUR111.00 from the previous EUR136.00, following Volkswagen's recent lowering of its 2024 guidance.
Volkswagen has confirmed that it expects to finish the year at the lower end of its updated operating margin guidance range of 6.5-7.0%, a revision made from the earlier forecast of 7.0-7.5%. To bolster sales, Volkswagen plans to launch 30 new products in the latter half of 2024, half of which are battery electric vehicles (BEVs).
These launches are anticipated to offset the inventory build-up experienced in the first half of 2024 and to continue the positive trend in automotive free cash flow.
Increasing BEV sales remains imperative for Volkswagen, as the company is yet to achieve the sales volume necessary to meet the stringent 2025 CO2 emissions targets in Europe.
Despite the challenges associated with high battery costs, Volkswagen remains confident in its strategic direction and execution plan, with a clear focus on electrification, productivity, and efficiency.
InvestingPro Insights
As Volkswagen AG (OTC: VWAGY) grapples with financial challenges and internal resistance to cost-cutting measures, InvestingPro data offers additional context to the company's current situation. Despite the recent guidance revision, Volkswagen's P/E ratio stands at a low 3.51, suggesting the stock may be undervalued relative to its earnings. This is further supported by an InvestingPro Tip indicating that the company is trading at a low Price / Book multiple of 0.29.
Investors may find solace in Volkswagen's dividend policy. With a dividend yield of 5.67% and a 33-year streak of consecutive dividend payments, as highlighted by an InvestingPro Tip, the company continues to reward shareholders despite its challenges. This could be particularly attractive to income-focused investors in the current economic climate.
However, the company's financial health shows mixed signals. While Volkswagen boasts a substantial revenue of $347.97 billion over the last twelve months, its EBITDA growth has declined by 12.88% during the same period. This aligns with the management's narrative about the need for significant cost reductions.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Volkswagen, providing a deeper understanding of the company's financial position and market performance.
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