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Porsche is now more valuable than VW: Here’s what the pros think of the carmakers

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Luxury automaker Porsche’s market cap raced past its former parent company Volkswagen Group’s a week after its stock market debut. Shares in Porsche AG closed more than 10% higher at the end of its first week of trading, valuing the company at 82.65 billion euros ($80.6 billion) — making it Europe’s most valuable car maker. Volkswagen , which sold 25% of Porsche, was valued at 79 billion euros. Where does Porsche go from here? Porsche is now the fifth-most-valuable listed company in Germany, after Linde , SAP , Deutsche Telekom and Siemens . While it’s already set to be added to the MSCI World Index on Oct. 12, the stock is also likely enter the country’s premier DAX index soon. Automotive equity analysts at Jefferies valued the company at 85 billion euros at the time of its IPO, which is still nearly 3% below current trading levels. Compared to its parent company VW, which makes nearly 10 million cars annually, Porsche manufactures just over 300,000 cars, but accounts for a quarter of profits at Volkswagen. Some investors, such as Louis Navellier of Navellier, are already comparing the German firm to Tesla , the largest electric carmaker in the world. “Do not be surprised if Porsche soon trades at Tesla-like valuations since Porsche’s electrification plan for its hot-selling Macan EV is expected to be an instant success,” the fund manager, who oversees $1 billion in assets, said. Porsche AG — the spun off carmaker — is not to be confused with Porsche SE, the holding company for the Porsche family, which owns 31.4% equity in Volkswagen and 12.5% in Porsche AG. But what about VW? The Volkswagen Group still holds a 75% stake in Porsche. The company said it would distribute funds from its 25% stake sale as a special double-digit dividend, which some analysts argue will be hard to resist for investors. Although shares in VW have declined by 30% over the past year, they offer 5.7% in regular dividends already. VW recently appointed a new CEO — Oliver Blume — who has been chief executive of Porsche since 2015. As such, analysts are holding off on judging the company’s new strategy for now. According to FactSet estimates, analysts have an average price target of 204.56 euros on VW’s stock, which is 54% higher than the share’s current price. Philippe Houchois of Jefferies, the only analyst with a sell rating on the company, remains cautious about the impact to VW’s profits from its in Porsche sale. “Selling down high-multiple assets to raise capital and fund a capital-intensive strategy could result in a negative stub,” Houchois, who is among 16 analysts covering the stock, said. “For now, we reiterate our Underperform and continue to see VW slipping from early mover to slow follower in an industry where size matters less than intelligent scale.”

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