You may not have room in your garage for a Porsche, but soon, investors will have the ability to add Porsche's stock to their portfolios.
Volkswagen Group (FRA:VOW, Financial), a globally-renowned German automaker and the owner of brands such as its namesake as well as Audi, Lamborghini, Bentley and Porsche, plans to take Porsche public as its own separate company. The initial public offering is expected to bring the prestige brand a valuation of $60 billion to $85 billion.
Among the reasons for this IPO are that Volkswagen plans to boost spending on electric vehicle development to meet its goal of having EVs represent a quarter of sales by the end of 2026
Volkswagen plans to spend $88 billion or more over the next five years on EV development, with the ambitious goal of having EVs represent a quarter of sales by the end of 2026. Porsche is well on its way to meeting this landmark as well, since its Taycan EV passed its 911 model in sales. To be clear, Porsche isn't being spun off due to disagreement over electrification; the EV transition won't be cheap, and thus Volkswagen is tapping the capital markets for additional funding.
Institutional investors such as the T. Rowe Price Group and the Qatar Investment Authority are already showing interest in the offering. Volkswagen plans to make only 12.5% of Porsche shares available to individual investors, though, so the shares may be hard for retail value investors to get.
With a price-earnings ratio of 4.38, GuruFocus rates Volkswagen as mostly undervalued.
Volkswagen also has a dividend yield of 3.91%, with a three-year dividend growth rate of 7.1%.
Volkswagen has had its share of issues in recent years, including the diesel testing scandal, the Covid-19 pandemic and the chip shortage that’s plagued automakers across the board, to name a few. As a result, Volkswagen's stock has dropped 43% over the past year. That could make the stock a bargain if its sales rise with the proliferation of EVs.
There are still risks associated with investing in Porsche and Volkswagen. The automotive sector is known to be cyclical, and with a potential recession on the horizon and the war in Ukraine wreaking havoc on Europe's economies, consumers may not be rushing to purchase EVs at the first opportunity.
Volkswagen has a GF Score of just 60 out of 100, scoring high in value but low in momentum, financial strength, growth and profitability.
