On Tuesday, Citi reaffirmed its positive stance on Volkswagen AG (VOW:GR) (OTC: OTC:VWAGY), maintaining a Buy rating and a price target of EUR141.00. The endorsement follows a meeting with the CEO of both Porsche (ETR:P911_p) and Volkswagen (ETR:VOWG_p), Oliver Blume, in Singapore.
Citi's analysis suggests confidence in Blume's ability to steer Volkswagen in a new direction, despite the inherent challenges in the automotive industry's lengthy product and technology cycles.
The investment firm highlighted four key reasons for its optimistic outlook: Blume's unique position to enact change at Volkswagen, his strong backing from the Porsche family and improved relations with the workers' council, a clear shift in strategic direction, and the market's undervaluation of Volkswagen's potential for change.
This perspective comes in the wake of what Citi considers an unwarranted negative market reaction to Volkswagen's fourth-quarter 2023 and full-year 2023 results, as well as the fiscal year 2024 guidance.
Citi's analysis indicates that while it will take time to see improvements in free cash flow (FCF), the potential for Volkswagen's FCF and valuation to increase is substantial. The firm's statement underscores a belief in the long-term upside of Volkswagen's financials, despite the time it may take to realize these improvements.
The automotive giant's recent financial disclosures have not been met with enthusiasm by investors, yet Citi sees this as a misjudgment of Volkswagen's future prospects. With the market seemingly discounting the possibility of positive change at the company, Citi's stance provides a contrasting viewpoint on Volkswagen's trajectory.
The investment firm's reiteration of the Buy rating and price target is based on a comprehensive evaluation of Volkswagen's strategic initiatives and leadership. Citi's confidence in the company's future financial performance is rooted in the anticipated effectiveness of the changes being implemented under Blume's leadership.
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