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On Monday, RBC Capital Markets adjusted its outlook on Volkswagen AG (ETR:VOWG) (VOW:GR) (OTC:VWAGY), increasing the price target to €112 from the previous €97 while maintaining a Sector Perform rating. The revision comes as the automotive giant faces headwinds from U.S. tariff concerns and a challenging market environment in China.
Volkswagen (ETR:VOWG_p)’s full-year guidance has been reaffirmed, with anticipated revenue growth of up to 5% and an EBIT margin between 5.5% and 6.5%. However, the company has indicated that it expects to hit the lower end of these projections. The potential imposition of tariffs presents a notable risk, particularly to its premium brands such as Audi and Porsche, which do not have manufacturing facilities in the U.S. This has led Volkswagen to consider local production options, including a new facility for the Scout brand in South Carolina.
The RBC analyst noted that while revenue and EBIT forecasts are being lowered due to the margin impact from battery electric vehicles (BEVs) and tariff-related cost pressures, the firm has increased its EV/EBITDA multiple from 0.75x to 1x. This adjustment in valuation metrics is the primary driver behind the elevated price target.
The analyst’s statement highlighted the dual impact of tariffs and the evolving dynamics in China on Volkswagen’s performance. "We raise our PT to €112 from €97. Full-year guidance remains unchanged, with revenue growth of up to 5% and an EBIT margin of 5.5–6.5%, though the company expects numbers to land at the lower end of the range due to U.S. tariff concerns and weakening market dynamics in China," said the RBC Capital analyst.
Volkswagen’s strategy to mitigate tariff risks includes exploring localization options. The analyst added, "Tariffs pose significant risks, particularly for premium brands like Audi and Porsche, which lack U.S. manufacturing facilities, prompting Volkswagen to explore localization options, including the upcoming Scout brand facility in South Carolina."
The updated price target reflects the challenges and strategic shifts Volkswagen is undertaking as it navigates an increasingly complex global automotive landscape.
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