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The reviews are in for the 2024 Porsche Cayenne, which is available as a plug-in hybrid, and they are spectacular. Porsche stock could be spectacular as well, but the big question is, which one?
U.S. investors can be forgiven if that sounds like an odd question. If they want to buy Ford Motor (ticker: F), Tesla (TSLA), or General Motors (GM), they simply type in the ticker and go. Porsche isn't nearly as straightforward.
There are American depositary receipts of Porsche Automobil (POAHY), but that isn't Porsche , the car maker. It's a holding company that owns about 25% of the ordinary stock in Porsche and about 53% of the ordinary stock in Volkswagen (VOW.Germany).
Porsche, the maker of the famous 911, is actually named Dr Ing hc F Porsche AG, though it's usually just referred to as Porsche. The ticker of the U.S.-listed ADR is DRPRY. The company has 911 million shares outstanding in Germany, a total composed of 455.5 million ordinary shares and 455.5 million preferred shares. In Germany, it trades under the ticker P911. (Clever, huh?)
That's the one investors uninterested in complexity should consider buying. Though the stock is up roughly 40% from its initial public offering about eight months ago, there's still room for more gains, if trading in Ferrari (RACE) is anything to go by. Ferrari sells fewer, more expensive cars than Porsche, but both companies are low-volume, ultra-luxury car makers that have no problem selling out their annual production-and are less impacted by a slowing economy or affordability issues.
Porsche, though, trades for 18 times estimated 2024 earnings, less than half the 37 times Ferrari fetches. Ferrari deserves some premium-its earnings are expected to grow at about 13% a year on average for the coming two years, faster than the 9% rate for Porsche-but that premium seems a bit much. The franchises are similar enough that they can trade closer to one another. Valuing Porsche at 21 times, as Société Générale analyst Stephen Reitman does, would put Porsche stock at about $146 a share, or about $14.60 for the ADR, up 16% from Thursday's close of $12.59.
Porsche Automobil is more intriguing. Its stakes in Porsche and Volkswagen are worth roughly $39 billion, but it has an enterprise value (market capitalization plus debt) of just $25 billion, a 37% discount. There are reasons for that discount-potential payouts related to charges that Volkswagen had manipulated emissions testing in the U.S. is the largest overhang-but it's grown too large for Abhay Deshpande, founder of Centerstone Investors, to ignore. He believes a discount of 10% to 15%, in line with its historical discount, is more reasonable, and would imply a 50% gain for Porsche Automobil.
"I know the thesis about [P911] being highly profitable...a luxury goods kind of concept," Deshpande says. "We own the holding company."
Smead Capital Management CEO Cole Smead, who bought the Porsche IPO, now thinks shares in the holding company, Porsche Automobil, are the better bet. He cites the possibility, if not probability, that the latter decides to spin out the individual auto makers, or at least part of them.
Investors can take advantage of the holding company's complexity or keep it simple and buy shares in the auto maker. Either way, they should go far.
Write to Al Root at allen.root@dowjones.com
U.S. investors can be forgiven if that sounds like an odd question. If they want to buy Ford Motor (ticker: F), Tesla (TSLA), or General Motors (GM), they simply type in the ticker and go. Porsche isn't nearly as straightforward.
There are American depositary receipts of Porsche Automobil (POAHY), but that isn't Porsche , the car maker. It's a holding company that owns about 25% of the ordinary stock in Porsche and about 53% of the ordinary stock in Volkswagen (VOW.Germany).
Porsche, the maker of the famous 911, is actually named Dr Ing hc F Porsche AG, though it's usually just referred to as Porsche. The ticker of the U.S.-listed ADR is DRPRY. The company has 911 million shares outstanding in Germany, a total composed of 455.5 million ordinary shares and 455.5 million preferred shares. In Germany, it trades under the ticker P911. (Clever, huh?)
That's the one investors uninterested in complexity should consider buying. Though the stock is up roughly 40% from its initial public offering about eight months ago, there's still room for more gains, if trading in Ferrari (RACE) is anything to go by. Ferrari sells fewer, more expensive cars than Porsche, but both companies are low-volume, ultra-luxury car makers that have no problem selling out their annual production-and are less impacted by a slowing economy or affordability issues.
Porsche, though, trades for 18 times estimated 2024 earnings, less than half the 37 times Ferrari fetches. Ferrari deserves some premium-its earnings are expected to grow at about 13% a year on average for the coming two years, faster than the 9% rate for Porsche-but that premium seems a bit much. The franchises are similar enough that they can trade closer to one another. Valuing Porsche at 21 times, as Société Générale analyst Stephen Reitman does, would put Porsche stock at about $146 a share, or about $14.60 for the ADR, up 16% from Thursday's close of $12.59.
Porsche Automobil is more intriguing. Its stakes in Porsche and Volkswagen are worth roughly $39 billion, but it has an enterprise value (market capitalization plus debt) of just $25 billion, a 37% discount. There are reasons for that discount-potential payouts related to charges that Volkswagen had manipulated emissions testing in the U.S. is the largest overhang-but it's grown too large for Abhay Deshpande, founder of Centerstone Investors, to ignore. He believes a discount of 10% to 15%, in line with its historical discount, is more reasonable, and would imply a 50% gain for Porsche Automobil.
"I know the thesis about [P911] being highly profitable...a luxury goods kind of concept," Deshpande says. "We own the holding company."
Smead Capital Management CEO Cole Smead, who bought the Porsche IPO, now thinks shares in the holding company, Porsche Automobil, are the better bet. He cites the possibility, if not probability, that the latter decides to spin out the individual auto makers, or at least part of them.
Investors can take advantage of the holding company's complexity or keep it simple and buy shares in the auto maker. Either way, they should go far.
Write to Al Root at allen.root@dowjones.com
