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On Friday, Morgan Stanley (NYSE:MS) analysts upgraded Volkswagen AG (ETR:VOWG) (VOW:GR) (OTC:VWAGY) stock from Underweight to Equalweight and increased the price target to EUR94.00, up from the previous EUR86.00. The revision reflects a change in perspective regarding the automaker’s potential to enhance shareholder value despite facing numerous industry challenges.
The analysts noted that Volkswagen (ETR:VOWG_p)’s valuation multiples are the lowest in the sector, indicating a market perception of risk and uncertainty. However, they also pointed out opportunities for the company to improve its financial performance by streamlining its cost structure and adopting a more asset-light approach. This strategy includes reducing installed capacity and workforce, particularly in higher-cost countries.
Volkswagen has already initiated some of these changes as of December, with the current geopolitical landscape providing a unique opportunity to accelerate these reforms. The analysts believe that by engaging with unions and potentially receiving additional support from the German government, Volkswagen could further its efforts in restructuring.
The upgrade comes at a time when the automotive industry is navigating a complex environment, with supply chain disruptions and the transition to electric vehicles. Volkswagen’s move towards becoming more asset-light is part of a broader trend in the industry to adapt to changing market conditions and technological advancements.
Morgan Stanley’s revised price target and stock rating upgrade indicate a neutral view on Volkswagen’s shares, suggesting that the risks are now more balanced with potential rewards. The analysts’ comments underscore the importance of cost reduction and operational efficiency in the automaker’s strategy to create value for its shareholders.
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