JEFFERIES: Volkswagen Vz “buy” – boerse.de

VW pronounced its EV transition “bold, but realistic” and its recently-announced capital allocation plans “very convincing,” Jefferies said in a research note on Tuesday.

The brokerage firm added that the German carmaker’s emphasis on its software capabilities and recurring revenue streams resonated with them the most.

VW aims to achieve net revenue of at least €260 billion ($272 billion) and an operating margin of at least 10% by 2025, which the company says would make it one of the highest-earning volumes automakers. It also announced a capital allocation plan, which includes a share buyback program and higher dividends, totaling €15 billion, and an increase in investments in electrification and digitalization to €27 billion from €15 billion previously.

“In our view, the company is likely to achieve 10%+ margins in the medium-to long-term, driven by increasing economies of scale, a more optimized product portfolio, and higher content per vehicle,” Jefferies said.

VW’s EV transition is “very advanced” and the company’s plan to build its own batteries in Europe could give it a competitive advantage, according to the note.

The German carmaker’s stock price fell by as much as 2.6% on Tuesday following the announcement of the new strategy the previous day, but it closed 0.9% higher.

“While the new strategic vision might not have delivered on all the details investors might have hoped for, we believe the new strategy proves again Volkswagen’s ability to deliver, and we think it reasonable to expect the company to deliver on the new ambitious targets,” Jefferies said.