Declining Sales And Rising Costs Will Erode Margins

Key Takeaways

• Shifting consumer preferences and stricter environmental regulations threaten Piaggio's traditional markets and could render current product lines obsolete.
  
• Expansion in electric and light commercial vehicles is constrained by unreliable subsidies and weak profitability, while global supply disruptions further pressure margins.
  
• Strong margins and brand focus, product innovation, and geographic diversification position Piaggio to weather near-term demand softness and capitalize on long-term growth trends.

Catalysts

Engages in development, manufacture, and distribution of two-wheeler and commercial motor vehicles.

• With a revenue decline of approximately 13% in the first half of the year across Europe, the United States, and China, Piaggio faces persistent headwinds as urbanization accelerates and consumers in advanced economies increasingly opt for shared mobility platforms over personal scooter and motorcycle ownership, suggesting that future unit sales and top-line growth will continue to deteriorate.
  
• The company's heavy reliance on internal combustion engine sales in critical emerging markets, coupled with ever-stricter worldwide emissions regulations and rising environmental compliance costs, points to escalating R&D expenditures and the risk of existing product lines quickly becoming obsolete, which threatens to compress net margins over the coming years.
  
• Piaggio's share losses in core European regions-down one percentage point year-on-year, with Germany, France, and the UK posting double-digit sales declines-underscore the company's vulnerability to demographic aging and shifting consumer preferences, setting the stage for long-term stagnation or contraction in revenue from its traditional markets.
  
• Despite management's optimism about new electric launches, the LCV and electric three-wheeler segments in India remain heavily dependent on fragile government subsidies; every reduction in support is met with immediate demand collapse, making Piaggio's expansion strategy in these lower-margin categories both uncertain and structurally unprofitable for sustained earnings improvement.
  
• Ongoing global supply chain disruptions and persistently high logistical costs-intensified by geopolitical risk and the need to reroute shipping around major canals-will continue to erode profitability, raising the likelihood that Piaggio's current gross margin resilience is unsustainable in the long-term context of intensifying competition and industry-wide cost inflation.

Piaggio & C Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Piaggio & C compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Piaggio & C's revenue will grow by 3.6% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 2.9% today to 3.7% in 3 years time.
• The bearish analysts expect earnings to reach €64.1 million (and earnings per share of €0.18) by about August 2028, up from €45.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 14.5x on those 2028 earnings, down from 14.9x today. This future PE is lower than the current PE for the GB Auto industry at 42.5x.
• Analysts expect the number of shares outstanding to grow by 0.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 17.78%, as per the Simply Wall St company report.

Piaggio & C Future Earnings Per Share Growth

Risks

• Despite a 13% decline in revenues in the first half of 2025, Piaggio achieved record gross margin and EBITDA levels, indicating strong pricing power, disciplined cost management, and financial stability that could support margin resilience and profits even amid market weakness.
  
• The company has deliberately avoided price wars and focused on maintaining brand equity and premium positioning across Vespa and other brands, which supports pricing power and earnings quality in the long term.
  
• Piaggio continues to launch new products and electric vehicles, such as the electric Porter for urban commercial use in Europe, positioning itself to capitalize on long-term urbanization and sustainability trends that could drive future revenue growth.
  
• Management notes that demand softness in Europe is due to postponed purchases and macro uncertainty, rather than structural shifts away from two-wheeler ownership, suggesting that eventual consumer recovery in Europe and other developed markets could restore revenue growth.
  
• The company is successfully expanding in high-growth markets like India, with mention of new two-wheeler launches and improving performance in the region, which could increase top-line growth and diversify revenue streams away from more mature markets.

Valuation

• The assumed bearish price target for Piaggio & C is €1.6, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Piaggio & C's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €4.1, and the most bearish reporting a price target of just €1.6.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €1.7 billion, earnings will come to €64.1 million, and it would be trading on a PE ratio of 14.5x, assuming you use a discount rate of 17.8%.
  
• Given the current share price of €1.91, the bearish analyst price target of €1.6 is 19.4% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.