Volkswagen (XTRA:VOW3) has been thrown into focus after third quarter results showed weaker sales and a much larger net loss. This has prompted management to launch a multi year, €31b cost cutting and restructuring program.
Volkswagen shares have shown only a modest 1-day and 7-day lift after the results, while the 30-day and 90-day share price returns remain in decline and the year-to-date move is down 34.1%, matching a multi-year total shareholder return that has also been weak as investors weigh restructuring risks against long-term transformation plans.
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Volkswagen now trades at a steep discount to both analyst targets and some intrinsic value estimates after the sell off. Does that gap reflect real balance sheet and earnings risk, or has pricing moved too far?
Most Popular Narrative: 17% Undervalued
Volkswagen last closed at €70.20, while the most followed narrative on the stock pegs fair value at €84.54. That gap frames the current sell off as less of a value trap question and more of a timing and execution test.
The German car behemoth might not have reached my erstwhile calculus eventually; still, the magnetic pull of the roughly 70 Euros per share I had deemed fair back in March of last year has become ever more evident, with each month passing by. Yet now that the board of Volkswagen has agreed on the tough reforms necessary to turn its fortunes around, the bottom should be in. That does not make the shares an outright buy, mind; but at least, the times of profitable short-selling should be over, rendering the OEM a classic hold until the evidence is in that it can prevail against the Chinese onslaught on its home turf.
See why 15 investors see Volkswagen as 17% undervalued.
Result: Fair Value of €84.54 (UNDERVALUED)
Still, the restructuring could stall if internal pushback slows execution, and any further erosion in key markets would quickly test this undervaluation thesis.
Find out about the key risks to this Volkswagen narrative.
Next Steps
Sentiment around Volkswagen is clearly split, with meaningful risks on one side and potential rewards on the other. Move quickly, review the details, and weigh up the 3 key rewards and 4 important warning signs.
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