From Investing.com: 2024-11-22 04:41:39

Analysts at Citi Research defend a “buy” rating on Porsche AG stock following a recent selloff, citing a perceived opportunity amidst investor sentiment “capitulation”. Porsche’s shares have halved since their peak in May-June 2023, with a further 10% drop last week due to declining Chinese sales and weaker performance of the Macan model.

Broader market concerns over EU automakers, fears of slowing China demand, potential tariffs, and EU environmental regulations have contributed to what Citi sees as an exaggerated downturn for Porsche. While concerns exist, Citi analysts believe fears surrounding Porsche’s prospects are unlikely to fully materialize, with manageable impacts from China and U.S. tariffs.

Despite challenges from EU CO2 regulations, Citi views Porsche as well-positioned to absorb associated costs and predicts a potential recovery in earnings in FY2025. Analysts emphasize the importance of Porsche’s management execution in addressing operational issues. Citi sets a price target of €85 for Porsche shares, with a discounted cash flow model valuation based on long-term EBIT margins of 18%.

While risks such as higher investment costs exist, analysts find Porsche’s current valuation attractive given the potential for recovery and profitability relative to peers like BMW and Mercedes-Benz Group. Citi remains confident in Porsche’s potential to rebound in FY2025, with improvements in margins expected to exceed 15%.



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