When Volkswagen AG split off from Porsche AG in late 2022, the investment community envisioned a stock of “supercars” that would rival Ferrari. The dream has yet to come true, and some investors doubt it ever will.
While Ferrari's shares have soared more than 50% since the start of last year, their counterparts in Porsche have risen by about a fifth, bringing its market value closer to par with that of its former parent, a a long way from a gap that once reached 40 billion euros ($43 billion).
At the same time, Porsche's price-to-earnings ratio has fallen to less than a quarter of Ferrari's, weighed down by the recession in China – long Porsche's biggest market – and production delays that have hit traffic key models, including the electric version of the best-selling Macan SUV.
The outlook for 2024 doesn't look good, with Porsche telling analysts last week that sales volumes will likely be flat.
Porsche will focus on “value-oriented growth and a stable sales level” in 2024, the company stressed in an online response to questions, adding that “We are laying the foundations for the future and upgrading four of the six model lines.”
Immediately after the initial public offering, Porsche's valuation priced its shares at a forward PE ratio of around 20, similar to that of other luxury brands such as LVMH, but well away from Ferrari's 40. It was still significantly higher than VW's PE ratio which was below 5.
The pricing and an initial rally in the stock were fueled in part by “VW owners selling VWs and buying Porsches, as well as auto investors looking for similar successes as with Ferrari,” said RBC Capital Markets analyst Tom Narayan . The subsequent decline had “more to do with Porsche specifically”, he said.
Central to investor frustration are how few options Porsche has to deal with the slowdown in China and the extent of implementation risk when it comes to introducing new models, according to Bloomberg Intelligence analyst Michael Dean.
Unlike Ferrari, whose business model (rare cars) drives it sold-out stretching several years ahead, Porsche is more tied to macroeconomic forces, with China's revenue share falling to 26% in the first half of 2023, up from nearly a third a year earlier.
The presentation of the electric Macan
There have also been two years of delays to the launch of the electric Macan, which is now scheduled for Thursday in Singapore. At the same time, the near-term future of electric vehicles looks less rosy with sales declining.
However, it's not all bad news for Porsche investors. The stock's fall has given it room to outperform Ferrari over the next 12 months, with the average price target of analysts tracked by Bloomberg pointing to a 34% gain, compared with about 8% for its Italian rival and 32% for the VW.
However, it's not all bad news for Porsche investors. The fall in the stock has given it room to outperform Ferrari over the next 12 months, with the average price target of analysts tracked by Bloomberg pointing to a 34% gain, compared with about 8% for its Italian rival and 32% for VW.
Still, investors will be looking for evidence before Porsche regains initial optimism since its IPO, said Swetha Ramachandran, fund manager at Artemis Investment Management.