On Monday, Stifel issued a downgrade for Porsche Automobil Holding SE (PAH3:GR) (OTC: POAHY) stock, moving the rating from Buy to Hold. The firm also significantly reduced the price target for Porsche shares to EUR45.00, a decrease from the previous target of EUR69.00.
Stifel's reassessment of Porsche's stock comes after revising expectations for Volkswagen (ETR:VOWG_p)'s earnings per share (EPS) and its dividend payout ratio. The firm now anticipates that the dividend inflow from Volkswagen to Porsche will be approximately EUR500 million less per annum.
This projection is rooted in a scenario for Volkswagen described as "2025: big risks, big opportunities," which suggests a more cautious outlook for Volkswagen's financial performance and, by extension, Porsche's ability to deleverage through dividend payments.
The analyst at Stifel explained that the reduction in expected dividends from Volkswagen could be a temporary situation that may not affect Porsche's fundamental value. However, the potential lack of deleveraging led to the question of Porsche's attractiveness as an investment compared to directly investing in Volkswagen or its products like the Porsche 911.
In adjusting the price target for Porsche, Stifel applied a long-term average holding discount of 32%, which led to the new target of EUR45.00. This recalibration reflects the firm's revised expectations for Porsche's investment prospects in light of the anticipated lower dividend contributions from Volkswagen.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Porsche Automobil Holding SE's financial position, offering context to Stifel's downgrade. Despite the lowered outlook, Porsche's stock currently trades at a P/E ratio of 2.54, suggesting it may be undervalued relative to earnings. This is reinforced by an InvestingPro Tip indicating that the company is "trading at a low earnings multiple."
The company's dividend yield stands at 3.89%, which aligns with another InvestingPro Tip stating that Porsche "pays a significant dividend to shareholders." This could be particularly relevant given Stifel's concerns about reduced dividend inflows from Volkswagen affecting Porsche's ability to deleverage.
It's worth noting that Porsche has maintained dividend payments for 29 consecutive years, according to InvestingPro Tips. This long-standing commitment to shareholder returns may provide some reassurance to investors despite the current challenges highlighted in the analyst report.
For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Porsche Automobil Holding SE, providing a broader perspective on the company's financial health and market position.
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