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Why Porsche’s Stock Can Keep Speeding Higher

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Many may dream of having a Porsche sports car in the garage, but owning the company’s stock could be just as rewarding.

Shares of
(ticker: P911.Germany), maker of the iconic 911 that has resembled a futuristic spaceship since it made its debut in 1964, only recently came back on the market. Porsche was spun off by Volkswagen last year, and its stock has since risen 40%.

The reason it has sped higher is because it trades more like a luxury good than a traditional car maker. Porsche trades at 20.6 times earnings.
(VOW.Germany), the company with which it has deep business and historical ties, trades at 5.7 times earnings.
Ford Motor
(F) is at 8.8 times.

It isn’t unheard of for a car company to masquerade as something else on the stock market.
(TSLA) famously trades somewhat like a technology company, at 47 times earnings, as investors bet that being the leader in electric vehicles will pay off in the future.

Porsche—and, for that matter, Italian rival Ferrari—are more like luxury-goods company
LVMH Moët Hennessy Louis Vuitton
(MC.France), which makes pristine leather bags, perfume, and Champagne and trades at 25 times earnings.

What they have in common is that they sell things that are highly desirable to wealthy people for whom price is no object. That means margins can be generous.

Porsche is also helped by the ability to keep costs down through its deep ties with VW. They share production facilities and cooperate to continually improve batteries. Porsche aims to make 80% of its cars electric by 2030.

Porsche stands out “by virtue of its somewhat unique profile at the crossroads between the premium and luxury segments,” say Oddo BHF analysts led by Anthony Dick. This allows it to “capitalize on the robust demand and richer margins found at the high end, while enjoying the scale required to smoothly finance the technological shift affecting the sector.”

Porsche, based in Stuttgart in southwest Germany, employs about 37,000 people and has a market capitalization of 102 billion euros ($109 billion). In addition to the classic 911, it also makes the Cayenne SUV, the Taycan electric vehicle, and several other models.

The company is valued at a significant premium to its peers, according to FactSet. Shares have risen 20.7% this year to €114.40. Its average target price is €123.71. Six analysts rate the stock a Buy and six rate it a Hold.

VW and Porsche go way back. Ferdinand Porsche, founder of his namesake company, designed the Beetle in 1938. His grandson would later become CEO of VW in 1993.

In the first decade of this century, the two companies engaged in a bitter boardroom battle as the much smaller Porsche tried to leverage its premium valuation to buy VW, only to see the effort backfire as the market turned; VW bought Porsche instead. In 2012, VW bought the last of Porsche’s shares outstanding and took the company private.

After a few years of impressive production growth, VW in October floated 25% of Porsche on the stock market, with a debut price of €82.50. Juergen Pieper, at Metzler Capital Markets, is one of the analysts who thinks the shares can go higher, giving them a medium-term price target of €130.

“Demand for Porsche’s high-quality products is likely to remain very robust,” Pieper says. The segment of consumers “eligible to buy a Porsche model is growing disproportionately strongly in all major regions—benefiting a brand very high up in the ranking of preferred luxury labels.”

Write to Brian Swint at


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