Volkswagen (DE:VOW3) stock is falling today on the news that several plants in Germany are closing. The European automaker has been struggling recently, attempting to stay afloat in a volatile and competitive market. But now Volkswagen has reported that it is shutting down multiple plants, eliminating thousands of jobs, and reducing pay by 10%. This suggests that things may have been worse for the company than they seemed. Such stringent cost-cutting measures are often a symbol of distress.
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What Does This Mean for Volkswagen Stock?
News of the Volkswagen plants closing has cast a dark shadow over the company’s growth prospects. This is reflected by the market’s reaction. As of this writing, VOW3 stock is down 1% amid significant volatility. Despite rising last week, Volkswagen has not experienced any sustained momentum in quite a while and has spent the past six months trending downward.
The Financial Times reports that Thomas Schäfer, Volkswagen’s head of brand, recently stated that the automaker is not making enough money from its cars. “At the same time, our costs for energy, materials, and personnel have continued to rise. This calculation cannot work in the long term,” he added.
Volkswagen may have been on a losing streak lately, but Schäfer’s statements suggest that this downward trajectory is likely to accelerate, at least in the short term. Even if Volkswagen can reduce the operating costs necessary to boost production, it will take time to get there. In the meantime, other European automakers will continue chipping away at Volkswagen’s market share.
Is Volkswagen Stock a Buy, Sell, or Hold?
Wall Street remains mostly bullish on Volkswagen despite its challenges. Analysts have a Moderate Buy consensus rating on VOW3 stock based on nine Buys, three Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Despite significant volatility over the past year, the average VOW3 price target of €141 per share represents a 54.61% change from current levels.
