Volkswagen Undervalued but Not for the Faint Hearted

Caution is warranted as VW shares are likely to be volatile from the likely announcements of management changes and the criminal investigation of Volkswagen diesel-gate

Richard Hilgert 29 October, 2015 | 8:00AM

Even after assuming harsher fines and penalties, as well as our assumptions for degradation of the brands, Volkswagen shares appear to be undervalued. With a five-star rating, the stock trades at more than a 40% discount to Morningstar analysts’ €190 fair value estimate.

Automotive revenue is unscathed by the diesel emission scandal

Even so, under the current circumstances, Volkswagen (VW.) stock is not for the faint of heart. Caution is warranted as shares are likely to be volatile from heavy news flow hitting the markets on the likely myriad of company announcements about management changes and about the criminal investigation of Volkswagen diesel-gate. Headline news risk will keep stock price volatility high for several months as the diesel emission debacle will result in more management changes, government fines, higher recall costs, and litigation.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Volkswagen AG160.40 EUR-0.12

About Author

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

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