On Tuesday, Barclays (LON:BARC) upgraded Porsche AG (P911:GR) stock from Equalweight to Overweight, setting a price target of EUR70.00. The revision follows a period of underperformance for the automaker in comparison to its European counterparts. Porsche AG's shares dropped approximately 15% in the last month, while the STOXX Europe 600 Automobiles & Parts index (SXAP) saw a lesser decline of 5%.
The analyst from Barclays noted that despite the underperformance, investor sentiment was improving for Porsche AG. However, the firm had previously expressed concerns regarding the company's high exposure to US/China tariffs and uncertainties surrounding its 2025 volume, margin, and cost projections. These issues were highlighted in a review following the third-quarter results on October 28, which raised questions about the company's valuation at 15 times price-to-earnings (P/E).
The third-quarter conference call provided more clarity for the fiscal year 2024, reducing some risks, but the outlook for 2025 and 2026 remains somewhat uncertain. Despite this, the analyst believes that the current lower share price levels, near all-time lows, offer a 'rebased' path for earnings growth in the coming years.
Barclays has conducted a comprehensive model update, adjusting its forecasts by raising estimates for 2024 while reducing them for 2025 and 2026. Even with these adjustments, the firm anticipates that Porsche AG will achieve over 10% year-over-year earnings per share (EPS) growth in 2025 and 2026. The analyst's projection is 4% below the 2025 Bloomberg consensus but aligns with expectations for 2026.
The analyst concluded that with earnings expectations for 2025 and 2026 nearing a 'rebased' level, investors are likely to re-engage with Porsche AG's shares at the currently depressed prices.
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