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Stocks of Volkswagen Plummet as Automaker Forecasts Slowing Sales

March 1, 2024
minute read

Volkswagen faced a notable decline in its shares during the afternoon on Friday, triggered by the release of its preliminary results. These results unveiled a nearly stagnant profit growth for the German automaker in the previous year, coupled with a projection of modest sales expansion.

As the largest automaker in Europe, Volkswagen disclosed that its operating profit before factoring in special items experienced a marginal increase of 0.3%, reaching €22.6 billion in 2023. This was against the backdrop of a 15.5% surge in revenue, which soared to €322.3 billion. The market consensus, as indicated by analysts surveyed by Visible Alpha, had anticipated a slightly lower adjusted operating profit of €22.19 billion paired with sales reaching €316.47 billion.

One noteworthy element in Volkswagen's financial narrative was the proposed dividend, aligning with a payout ratio of 28%. However, this figure fell short of the company's target ambition of achieving a 30% payout ratio. This discrepancy likely contributed to investor concerns and the subsequent downturn in share value.

Looking forward, Volkswagen outlined its expectations for the upcoming year, forecasting revenue growth of up to 5%. Simultaneously, the company projected an operating margin ranging between 7% and 7.5%. This comes in the wake of a decline in the operating margin to 7% in 2023, down from 8.1% in the preceding year. Visible Alpha's analyst poll foresaw revenue hitting €318.2 billion in 2024, accompanied by an operating profit of €22.81 billion.

The market's response to Volkswagen's financial outlook was evident in the decline of the company's shares, ticker symbol VOW3, which plummeted by 5%. This marked a significant setback, with the shares having experienced an overall 16% drop over the past 52 weeks.

The downward trajectory of Volkswagen's shares reflects the prevailing concerns among investors regarding the company's ability to meet its financial targets and sustain growth.

In essence, Volkswagen's financial performance in 2023, though displaying a marginal increase in operating profit and robust revenue growth, has raised questions and uncertainties among investors. The deviation from the anticipated adjusted operating profit, coupled with the shortfall in the proposed dividend payout ratio, has contributed to a cautious market sentiment. As the automotive giant charts its course into the future, the market will closely monitor whether Volkswagen can rebound from this setback and regain investor confidence through its projected revenue growth and operating margin targets for the coming year.

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Adan Harris
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Adan Harris
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