Volkswagen Scandal: Analysts Downgrade Shares

Volkswagen has been accused by the Environmental Protection Agency of manipulating diesel emission tests, causing Morningstar equity analysts to lower the shares' fair value

Richard Hilgert 23 September, 2015 | 12:20PM
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We have lowered our fair value estimate for Volkswagen (VOW) to €210 from €230. The decrease is as a result of the potential Environmental Protection Agency, or EPA, and California Air Resources Board, or CARB, fines and probable court litigation that may result from alleged manipulation of diesel engine emission testing for regulatory requirements in the U.S.

Volkswagen could face fines up to $37,500 per vehicle

Even though some media reports have speculated that the EPA fine could be as much as $18 billion, we have reserved EUR 9 billion in our DCF model for fines and litigation. We think that any weakness in the shares of Volkswagen stock should be viewed as an opportunity for long-term investors to own the shares at discounted prices. Prior to the circulation of media reports about the EPA and CARB accusations, the stock was already trading at a 23% discount relative to our new EUR 210 fair value estimate.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Volkswagen AG268.60 EUR-3.45Rating

About Author

Richard Hilgert  Richard Hilgert is a securities analyst on the Industrials Team.

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