Stock market's surprise dip: Investors ponder the future prospects of Volkswagen and Stellantis shares following market shock
The Chinese government's support measures for the automotive industry could potentially boost car sales in China, but fundamental problems remain, casting a shadow over global automotive giants like Volkswagen and Stellantis.
In recent times, the stock prices of both these companies have seen a downturn. Stellantis' stock has lost over eight percent, reaching its lowest level since the end of 2022, reflecting investor concerns about excess capacity and underperforming brands like Maserati. Volkswagen's stock, too, has dipped nearly three percent, stabilizing at around 96.38 euros, following the company's latest profit warning.
Analysts are being cautious in their forecasts due to ongoing problems in the industry. Swiss bank UBS sees Volkswagen as overvalued, suggesting a sell rating and a price target of 84 euros. Jefferies analysts, on the other hand, are more optimistic, with a price target of 140 euros and a buy rating for Volkswagen, but they caution about the profit warning and restructuring timing.
For Stellantis, the outlook is more challenging. The company expects a significant tariff impact of approximately €1.2 billion in the second half of 2025, combined with declining revenues and deliveries in key markets such as Europe and North America. This has led to a downward revision of the company's profit outlook. CEO Carlos Tavares now expects an adjusted operating margin of 5.5 to 7 percent, down from the previously expected double-digit figure.
Regarding potential investment advice:
- Volkswagen: The margin improvements are short-term and do not yet signal a definitive turnaround. Investors should be cautious, as profitability challenges persist and the company needs more substantial operational changes to drive sustained growth.
- Stellantis: The company's exposure to tariffs and declining sales volumes create near-term risks. While new products, including hybrid and combustion engine models, aim to boost sales, the significant stock decline and structural challenges suggest a risky environment. Investors may want to consider the impact of tariffs, excess capacity, and brand struggles before investing. The management's efforts to address costs may also create uncertainty about the sustainability of profit improvements.
In summary, both stocks face near-term pressures and uncertain prospects following their profit warnings. Caution and close monitoring of upcoming earnings reports, management commentary, and tariff developments are advisable before making investment decisions. As ETF experts reveal copper, water, or AI as potential megatrends of the future, it's essential for investors to keep their eyes on the horizon while navigating the current challenges in the automotive industry.
[1] Stellantis Cuts Profit Outlook Due to Problems in US Market (Reuters, 2023) [2] Stellantis Stock Falls as CEO Lowers Profit Outlook (Bloomberg, 2023) [3] Volkswagen Issues Another Profit Warning (Financial Times, 2023)
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