Volkswagen: The automaker is teetering dangerously
Let’s first turn our attention to a problem child of the German economy. The Volkswagen Group is currently going through very difficult times. The Wolfsburg-based automaker is grappling with a drastic drop in profits. In the second quarter, net profit plummeted by 33%; only about EUR 1.5 billion remains. Business in China is increasingly turning into a fiasco. Deliveries there plummeted by a whopping 37%. Although global revenue rose marginally to just over EUR 82 billion, the weak operating margin of 4.2% fell well short of expectations.
CEO Oliver Blume is now planning a historic cost-cutting drive. A radical restructuring program is intended to reduce administrative costs by up to EUR 11 billion. Pure fear is spreading through the factories. Up to 50,000 job cuts are on the table. Some scenarios even suggest that 100,000 jobs are at risk. Well-known locations such as Hanover, Zwickau, Emden, and Neckarsulm are under scrutiny. The revenue forecast for the current year has been significantly lowered. This is putting the share price under massive pressure once again. The stock is currently trading around EUR 71. This represents a year-to-date loss of over 30%. The golden years in Wolfsburg seem to be over for the time being. The question even arises: will Volkswagen even still exist in five years? With such high personnel costs, if the company posts a loss rather than a profit, or if its margin collapses entirely, nothing can be ruled out.
Porsche AG: Tough Cost-Cutting Measures in the Luxury Segment
From the crisis-stricken parent company VW, the path leads to its more luxurious subsidiary. Porsche AG is also feeling the harsh winds of change. Porsche is operating significantly more profitably than Volkswagen, with an operating margin of nearly 9%. Its half-year profit also amounts to over EUR 1 billion—yet even here, not all that glitters is gold. Global deliveries fell by 16% in the first half of the year. Even well-heeled customers prefer to keep a tight grip on their money in times of crisis.
Behind the scenes, a massive shake-up in personnel is also looming. Longtime Executive Board member Albrecht Reimold is retiring at the end of August. He is handing over the reins for production and logistics to Christian Friedl. This change at the operational helm is taking place at an extremely critical time.
Porsche is currently rolling out its own “Future Package” for far-reaching restructuring. By 2035, up to 9,000 jobs could be cut. According to media reports, this primarily affects administration and development.
Porsche AG’s share price has also recently experienced a bit of a roller-coaster ride. It has recently stabilized at around EUR 44, still just above the 50-day SMA, and most recently, the 50-day SMA even managed to cross above the 200-day SMA from below. This is a bullish signal in technical analysis, and there are further glimmers of hope for loyal investors. Experts at Bankhaus Metzler see enormous upside potential in the stock. They recently set an optimistic price target of EUR 64. Porsche is now maintaining its high profitability through strict cost discipline and exclusive special-edition models.
It looks as if Porsche’s shares could finally be ready to gain momentum.
RE Royalties: “Green Yield” and Technical Breakout Potential
Those looking beyond the crisis-hit automotive industry will find a very different picture in certain niche markets and among smaller companies. RE Royalties is one such example. The company is an innovative pioneer in financing for renewable energy projects. Its business model is both highly innovative and proven to be resilient, even during periods of economic uncertainty.
The company grants short-term, secured loans to project developers. In return, it receives long-term royalties from solar, wind, and energy storage projects. Over USD 83 million has already been invested in well over 100 projects. The internal rate of return stands at an impressive 19%. Sustainability and financial strength are nearly in harmony here.
This year, too, key decisions were made very early on. In February, an additional USD 800,000 was invested in a US solar portfolio managed by Solaris Energy. The total investment there is steadily growing to as much as USD 9 million.
In March, the Executive Board also announced a far-reaching strategic review. The goal is now to maximize long-term value for shareholders. Even the sale of companies or major partnerships is being considered with an open mind.
The company’s fundamental strength is now also reflected in the chart, and things could get exciting. Fortunately, patience in the stock market is often rewarded. RE Royalties shares could now break out of its wedge pattern at a price of CAD 0.40 to 0.41. On the downside, the stock is well supported by a horizontal level at CAD 0.35 to 0.40. The shares could then begin to gain momentum again.
According to technical analysis, an initial price target would then be in the region of CAD 0.50. In the event of a strong breakout, the CAD 0.60 range could even come into view. The project pipeline is well-stocked, and the company will likely continue to meet the industry’s massive capital requirements profitably.
In summary, the three stocks under review are going through completely different market phases. Volkswagen is struggling with a severe structural upheaval and massive sales slumps. Deep and painful cutbacks are completely unavoidable here.
Porsche AG appears in a better position. However, it must also make significant cost cuts and restructure its management. However, positive signals are coming from both technical analysis and analysts.
RE Royalties presents itself as an alternative option in these turbulent waters. The company is growing steadily and benefiting from the green transition. From both a fundamental and technical perspective, it offers a sober but thoroughly positive outlook for the coming months.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as “Relevant Persons”) may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a “Transaction”). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
For this reason, there is a concrete conflict of interest.
The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.
Risk notice
Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.
The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.
The acquisition of financial instruments involves high risks, which can lead to the total loss of the invested capital. The information published by Apaton Finance GmbH and its authors is based on careful research. Nevertheless, no liability is assumed for financial losses or a content-related guarantee for the topicality, correctness, appropriateness and completeness of the content provided here. Please also note our Terms of use.
Stockhouse does not provide investment advice or recommendations. All investment decisions should be made based on your own research and consultation with a registered investment professional. The issuer is solely responsible for the accuracy of the information contained herein. For full disclaimer information, please click here.
