UBS Downgrades Porsche Automobil Holding SE

Analysts at UBS have downgraded Porsche Automobil Holding SE to a sell rating from the previous neutral stance in a note dated Monday.

Price Target Reduction

The note cites a reduced price target for Porsche SE, now set at €32 per share, down from €42, reflecting UBS's revised financial models for its core holdings, Volkswagen Group and Porsche AG.

Challenges in Revenue and Profitability

UBS indicates challenges in revenue growth and profitability within Porsche’s core investments. Despite expected revenue stabilization at €39 billion for Porsche AG in 2025, operating profit margins are projected to improve marginally to 14.6% from currently depressed levels.

This limited growth stands in contrast to typical expectations of a robust recovery associated with Porsche’s luxury valuation.

Concerns on Performance Execution

Analysts flagged continued execution issues, weak cost discipline, and a suboptimal governance structure as key inhibitors to performance. Volkswagen's financial outlook adds to the concerns as UBS maintains its sell rating on VW, revising its price target for VW's preferred shares to €75, down from €84.

Strains on Dividend Payments

The group’s complex restructuring in Germany and potential charges in the fourth quarter may strain dividend payments, crucial for Porsche SE’s income stream. UBS forecasts a more than 50% reduction in VW's dividend per share to €4, further pressuring Porsche SE’s dividend income.

Financial Stability Risks

Additionally, Porsche SE’s financial stability appears at risk due to a high net debt of €5.1 billion and a narrowing 30% net asset value discount deemed unjustified amid the headwinds.

Concerns over managing refinancing pressures starting in 2027 arise, particularly with declining dividends from core investments.

Subdued Outlook

UBS's revised valuation underscores a subdued outlook for Porsche SE, primarily driven by diminished growth expectations in underlying assets and structural inefficiencies. For Porsche SE to thrive, better performance from Volkswagen and Porsche AG, especially regarding dividends, is essential; otherwise, the future looks grim.