Volkswagen vs. Tesla
Volkswagen presented an excellent investment opportunity a few months ago. It is not only because of its core business, but it also expected it to continue investing in EV technology and start focusing more in this direction. However, in this respect, it can be said that he was underestimated. For several reasons:
• compared to the entire EV sector, the company was significantly undervalued, despite massive sales volume, • has a significantly stronger financial position than the majority of EV companies, • has its distribution networks and millions of loyal customers around the world, • market share in Europe is stable and high, • it was only a matter of time when "valuation matters."
In recent weeks, we can see a significant increase in Volkswagen shares' price and a relatively strong price drop on Tesla shares. As I show in the chart above, Volkswagen has several times higher sales than Tesla, but its market capitalization is still significantly lower. Showing Price-to-Sales is below 1.00, and Tesla is around 20. Is this mid-term growth in Tesla shares justified?... even though the market is pricing the too high growth of Tesla in the coming years. Volkswagen has been in the market for many more years and is established, so to say that Tesla will gain dominance, especially in Europe, is very bold. Even if Tesla could once gain market share as Volkswagen, what would be its market share? 3-5 trillion for the same or similar business model, similar operating margin, similar CAPEX? If so, then Volkswagen has much room to grow…. If not, the bubble will burst.
Volkswagen sold 422,000 electric and hybrid cars last year. They say their new ID.4 model is a "gamechanger." Volkswagen has invested and continues to plan to invest billions in building new production facilities. "Europe is probably going to be about 70% EVs within ten years. I'd say China probably around 50%, and I think the U.S. would be closer to 30%, 40% or somewhere in there, " says Keogh (CEO), who calls the global transition to EV a massive adoption of the new technology.
The price has exploded tens of percent higher in recent weeks. The graph is too extended, and you have to wait for the pullback, which will most likely come. The spread between EMA 50 and 5 is reaching historical levels, indicating that this growth is too optimistic. Besides, the price is in a strong resistance band. In the short term, a decline is very likely if the situation calms down a bit and after FOMO. However, the long-term potential may not be exhausted.