What happened
Shares of German auto giant Volkswagen (VWAGY +2.23%) were trading sharply higher on Monday morning, after a Wall Street analyst raised his bank's price target for the stock on a bullish view of the company's electric car plans.
As of 10:15 a.m. EDT, VW's American depositary shares were up about 10.5% from Friday's closing price.
So what
In a new note on Monday, Deutsche Bank analyst Tim Rokossa raised his price target on Volkswagen's Frankfurt-traded ordinary shares to 270 euros, from 185 euros, while maintaining a buy rating on the stock.
Noting that Volkswagen now aims to sell 1 million electrified vehicles in 2021, the majority of which will be pure battery-electric vehicles (BEVs), Rokossa wrote that Volkswagen's full-year BEV sales total will likely be "very close to Tesla's (TSLA +2.96%) BEV sales."
The analyst went on to say that the with the global launch of the new VW ID.4 electric SUV now under way, there's a "good chance that VW could surpass Tesla's BEV sales as soon as next year," which in his view should increase the value that investors put on the company's electric vehicle strategy.
VW said that European deliveries of its new ID.4 electric crossover will begin before the end of March. Deliveries in the U.S. and China will follow later this spring. Image source: Volkswagen AG.
In what he called a "blue-sky scenario," Rokossa noted that if Volkswagen's electric-vehicle effort were valued as a separate company, using the price-to-sales multiples of successful pure-play BEV companies like Tesla or NIO, Volkswagen's mass-market electric vehicle platform would yield a value of almost 400 euros per share -- before even taking into account the premium electric vehicle efforts at VW subsidiaries Audi and Porsche.
Now what
Rokossa acknowledged that Volkswagen's share price could face some headwinds, including the possibilities of further weakness in the euro and a slowdown in China's premium vehicle market. But the potential price upside "more than compensates" for those concerns, he wrote.
