Main reasons why you should not give up on Volkswagen shares - Analysts
VW's stock plunged 20% early Tuesday and lost $14 billion in market capitalization, but some analysts aren't fretting over the future of the carmaker.
On the contrary, some market observers are still rather bullish on the German car giant in spite of the emissions scandal that is threatening the entire industry.
1) Tom Elliott, international investment strategist at DeVere
Group, said in an interview with CNBC that it's not likely that Volkswagen will be
subjected to much of political and media pressure, adding he'd be
"sorely tempted" to buy the stock at this price.
It currently has a price-to-earnings ratio of 5.64, which is
an important metric used by equity analysts to estimate how expensive a
stock is. The current average for the German DAX is 14.75.
UBS analyst Philippe Houchois, said in a note Tuesday that in spite of near-term concerns they are still upbeat "on VW as it is one of very few OEMs (original equipment manufacturers) whose earnings are meaningfully below potential."
The Swiss bank has a "buy" rating on the
stock but has reduced its target price to 290 euros. It's currently
trading at 105 euros and was lower by 20 percent on Tuesday morning.
2) It might have admitted fixing diesel vehicle emissions tests but it's less exposed to the technology than its counterparts.
JPMorgan auto analyst Jose Asumendi assessed on Tuesday that globally VW had 25 percent of engines exposed to
diesel technology. In comparison, BMW and Daimler have 35 percent and 45 percent, with Peugeot having 40 percent.
3) Before its profit caution on Tuesday morning, the stock
still had five "strong buy" recommendations and eight
"buy" recommendations from analysts. However, a series of downgrades meant this was quite lower from the recommendations a month ago.
Deutsche Bank's Tim Rokossa confirmed in a note Tuesday that the stock would react "materially negatively" on recent newsflow.
"It looks to put up another very challenging case on VW's shoulders in an already rough time of significant change and falling demand in major regions," he said.
