‘We think VW has changed’

Citi Research reiterated their Buy rating on Volkswagen (ETR:) and raised their 12-month price target on the German automaker to $158.00 (From $146.00) after analysts say the company has “changed”.

“Better sales, better earnings, better decisions,” wrote Citi analysts in a note, adding, “We see the Supervisory Board and management working more closely together, while the new CEO is making more pragmatic strategic decisions.”

In Q4 2023, Volkswagen sales have successfully surpassed the 2.5 million quarterly milestone, contributing to an annual run-rate exceeding 10 million units for the same quarter. This contrasts with the 9.2 million units sold in the entire fiscal year 2023.

Analysts believe that if VW’s 4Q sales rate remains consistent, it implies a potential 7%-8% increase in the company’s global volumes for FY24.

Citi anticipates a similar growth trend in European Union sales for FY24, particularly in light of low comparisons from the first half of 2024.

Citi’s projection for the underlying VW EBIT stands at €23 billion, surpassing the consensus estimate by €2 billion. However, it remains €2 billion below Citi’s own FY23 forecast, in alignment with the provided guidance, which accounts for the anticipated challenges arising from the deceleration in Germany, Europe, and China competition.