Porsche improves margin forecast, investors remain skeptical of IPO

For sharper, insightful business and economic news, subscribe to
The daily advantage newsletter. It’s completely free and we guarantee you’ll learn something new every day.

With the official name Dr.-Ing. hc F. Porsche Aktiengesellschaftthe luxury car manufacturer Porsche testifies to the existence of brand marketing.

On Monday, the company was busy touting its merits economic Mark. Ahead of an IPO later this year, executives said Porsche would accelerate revenue growth to 18% this year, from 16% in 2021, and a long-term operating profit margin of 20%. Investors still have questions.

The shareholders are benevolent

Porsche owner Volkswagen is expected to sell a minority stake in the fourth quarter to fund its ambitious electric car plans. VW also believes the IPO could unlock significant value, hitting a market capitalization of $81 billion on the promise of greater autonomy while retaining access to the resources of its sprawling parent company.

Projections look good: Porsche is aiming for up to 39 billion euros in revenue in 2022 and the company has said that its automotive Ebitda margin – an important indicator of profitability – could reach 27% by 2026, compared to 24.5% last year. It would follow luxury rival Ferrari, but leave Tesla and BMW in the rearview mirror. Porsche, which makes more than 300,000 cars a year, would offer those margins on a much larger scale than Ferrari, which only makes about 8,500.

But, as good as it sounds, investors worry about the complex structure of an IPO:

  • The planned listing would give a locking minority stake of 25% plus one share to the billionaire Porsche and Piech family who also control VW’s biggest shareholder, leading some investors to wonder whether the company will gain further independence.
  • Then there’s the question of how Porsche will continue to work with its current parent company – VW will retain 75% of its shares after the IPO, and the company is currently relying on cash flow from Porsche to compensate. its less profitable ranges. The split companies will also compete for supplies such as semiconductors and batteries.

All bets are void for races: “Porsche is not a safe bet in a recession because it is not as exclusive as Ferrari,” Daniel Roeska, automotive analyst at Bernstein, told Bloomberg. “And if you don’t change governance and allow Porsche to decide what’s best for itself rather than making group-level decisions, then you’re not maximizing shareholder value.”

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.