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On Monday, Morgan Stanley (NYSE:MS) maintained its Underweight rating on Porsche AG (P911:GR) but reduced the price target from EUR65.00 to EUR38.00. Stifel analysts attribute the price target adjustment to Porsche’s performance challenges over the past year. They pointed out that the automaker has suffered from a significant decline in margins, a lackluster product pipeline, and vulnerability due to its lack of local production in key markets such as the United States and China.
The analysts noted that while Porsche could gain from a reduction in tariffs between the US and Europe-China, expectations are that the stock will persist in underperforming compared to its European counterparts. The market’s valuation perspective on Porsche has shifted, according to Morgan Stanley, moving away from comparing it with luxury brands—which usually enjoy higher multiples—to comparing it with premium auto brands like BMW (ETR:BMWG) and Mercedes. These competitors are expanding more rapidly, have comparable profit margins, present lower risks, and are valued at substantially lower multiples.
Porsche’s exposure to the US and China markets has been highlighted as a particular concern due to the absence of local production facilities in these regions. This situation has contributed to the stock’s underperformance. The analysts believe that the company’s current challenges are reflected in the stock’s valuation, which now aligns more closely with premium auto manufacturers rather than luxury brands.
Despite these headwinds, the potential for tariff de-escalation could provide some relief for Porsche. However, Morgan Stanley’s stance indicates skepticism regarding any significant near-term recovery in the stock’s performance. The firm’s analysis suggests that investors are adjusting their expectations for Porsche, taking into account the company’s slower growth and the competitive landscape of the auto industry.
In conclusion, Morgan Stanley’s revised price target for Porsche AG reflects a cautious outlook on the automaker’s financial health and market position. The firm anticipates that Porsche will continue to struggle in comparison to its peers, despite possible benefits from changes in the tariff environment.
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