On Thursday, CFRA, a notable investment research firm, increased its price target for Volkswagen AG (VOW:GR) (OTC: OTC:VWAGY) to EUR115.00 from the previous EUR100.00, while maintaining a Hold rating on the stock. The adjustment follows Volkswagen (ETR:VOWG_p)'s impressive fourth-quarter earnings, which surpassed analysts' expectations.
Volkswagen reported a significant earnings per share (EPS) of EUR9.31 for the fourth quarter, a 78% increase from EUR5.24 in the same period the previous year, and notably higher than the anticipated EUR7.20 consensus.
The earnings beat was attributed to stronger-than-expected sales and margins. The company's revenue climbed by 14% to reach EUR87.2 billion, which was EUR5.9 billion above the consensus. Additionally, Volkswagen's gross margin expanded to 19.2%, 80 basis points above the consensus.
Despite the robust performance, CFRA has revised its EPS estimates downward to EUR29.75 from EUR31.20 for 2024 and to EUR33.00 from EUR33.20 for 2025. The new price target is based on a projected 2025 price-to-earnings (P/E) ratio of 3.5x, which the firm believes is a justified discount to historic averages due to more challenging comparisons facing European automakers.
The German automaker has provided a cautious forecast for the year ahead, predicting only a 3% year-over-year increase in deliveries for 2024, a slowdown compared to the 12% growth experienced last year. This modest outlook is set against the backdrop of a strong recovery year following the onset of the Russia-Ukraine conflict in February 2022.
In light of the upcoming challenges, Volkswagen is gearing up to introduce over 30 new models in 2024. However, CFRA anticipates that these new models may experience a slower uptake among consumers.
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