Berenberg Starts Volkswagen AG (VLKAY) at Sell
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Berenberg initiates coverage on Volkswagen AG (OTC: VLKAY) with a Sell rating.
Analyst Alexander Haissl commented, "We re-initiate coverage of Volkswagen (VW) with a Sell rating and a price target of €98 – restructuring not meaningful: In our view, the Future Pact (“Zukunftspakt”) announced on 18 October is more of realignment rather than a meaningful restructuring, which the market had hoped for. The agreements struck by VW with the unions and German government underpinned the fact that meaningful changes and restructuring are difficult to implement. Targeted savings are not enough to improve VW’s cost-competitiveness (personnel expenses are 400bp above the sector average) in a more meaningful way and may at best offset its excessive labour cost inflation (200bp above the sector average). VW’s weak cash flow generation (excluding JVs) is a concern, particularly given increasing cycle risks and committed investments in new technologies. Thus, the net industrial cash balance of more than €30bn (end of September 2016) may not be as safe as it appears."
Shares of Volkswagen AG closed at $27.63 yesterday.
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