VOW3: Improved U.S. Tariff Outlook Will Boost Sector Outperformance Versus Peers

Analysts have slightly increased their fair value estimate for Volkswagen to €112.08 from €111.13. This change reflects recent supportive adjustments to the company's price targets and an improved outlook compared to industry peers.

Analyst Commentary

Recent street research presents a nuanced outlook for Volkswagen, with analysts highlighting both encouraging factors and areas that warrant caution as they adjust their price targets and ratings.

• Some analysts have upgraded Volkswagen's outlook, moving to a more positive stance and increasing their price targets. This is attributed to the company's stronger positioning relative to German peers, particularly regarding U.S. tariff risks.
• Growing confidence in Volkswagen's execution abilities is leading to higher target prices. Expectations are for improved performance versus sector competitors.
• Analysts recognize Volkswagen's robust potential in key international markets, which is viewed as beneficial for future growth and valuation.
• The reinstatement of positive ratings by some firms reflects renewed optimism about Volkswagen's strategy and long-term earnings potential.

• Bearish analysts have taken a more conservative approach, lowering price targets to reflect potential challenges in meeting growth expectations.
• There is some caution about Volkswagen's ability to maintain its pace of execution and effectively navigate an increasingly competitive industry landscape.
• Concerns persist about sector headwinds and broader macroeconomic uncertainty, which could affect short-term valuation and investor sentiment.

What's in the News

• European carmakers, including Volkswagen, are grappling with severe chip shortages that could disrupt global production lines, even as China lifts export restrictions (Financial Times).
• Volkswagen has started developing its first in-house AI chip through a joint venture between its Cariad unit and Horizon Robotics. The company aims to boost advanced driving features and recover China sales (Financial Times).
• The company announced that technology developed with U.S. EV maker Rivian could extend beyond electric vehicles and also be used in Volkswagen's internal combustion engine cars, despite ongoing challenges in software integration (Reuters).
• Automakers, with Volkswagen among them, are racing to secure rare earths ahead of potential Chinese export controls, increasing concerns over future parts shortages (Reuters).
• Volkswagen has secured an adequate supply of chips for now, but its CEO warns that political solutions are urgently needed to address ongoing fragility in the semiconductor supply chain (Reuters).

Valuation Changes

• Fair Value Estimate has risen slightly to €112.08 from €111.13. This reflects a modest improvement in analysts' long-term outlook for Volkswagen.
• Discount Rate has increased marginally from 9.81% to 9.98%. This indicates a slightly higher risk assessment or hurdle rate applied by analysts.
• Revenue Growth forecast has edged up to 2.99% from 2.97%. This suggests expectations of a modest acceleration in Volkswagen's top-line performance.
• Net Profit Margin is now projected at 4.50%, a minimal increase from the previous estimate of 4.49%. This signals stable profitability prospects.
• Future P/E Ratio has risen to 4.66x from 4.61x. This implies a small adjustment in market valuation expectations for Volkswagen based on forecasted earnings.