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On Tuesday, Barclays (LON:BARC) analyst Erwann Dagorne downgraded Volvo AB (OTC:VLVLY)’s stock from Equalweight to Underweight, setting a price target of SEK280.00. Dagorne cited Volvo’s consecutive quarterly misses on Trucks margin in the second half of 2024 and an optimistic 2025 market outlook that seems at odds with market conditions, particularly in North America, as reasons for the downgrade.
Volvo’s stock had outperformed recently, which Dagorne suggested might be due to improving sentiment in Europe and its US-only industrial footprint. However, he expressed concern that investors might be overly complacent due to Volvo’s reputation for quality and resilience. Dagorne pointed out that, like its competitors, Volvo is not immune to the slowdown in the US market, as evidenced by the upcoming layoffs at its Dublin plant, which are set to begin in early April despite the introduction of its new VNL class 8 truck.
The analyst also noted that the significant strengthening of the Swedish Krona against the Euro and US Dollar has been largely overlooked by the market, adding further earnings and cash flow challenges to Volvo’s ambitious consensus for 2025-2027. Additionally, Dagorne highlighted that Volvo still faces a relative valuation disadvantage compared to its peers, particularly German competitors Daimler (OTC:MBGAF) Truck and Traton Group.
The downgrade reflects concerns about Volvo’s ability to meet its market expectations amid various headwinds, including currency fluctuations and a competitive market landscape. Volvo’s stock price target of SEK280.00 by Barclays suggests caution regarding the company’s future performance in light of these challenges.
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