(Bloomberg) — Porsche AG’s shares plunged after the sports-car maker said it will take an €800 million ($831 million) hit linked to revamping its lineup this year.
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Expenses tied to expanding the product portfolio with more combustion engine and plug-in hybrid models will drop return on sales to the 10% to 12% range this year, Porsche said late Thursday. The manufacturer expects its margin for 2024 to end up at the lower end of its forecast range, or around 14%.
Porsche shares fell as much as 8% in early trading, taking the stock’s decline over the past 12 months to more than 30% and deepening the slump since its 2022 initial public offering. Its market capitalization has halved from a high of €109.5 billion in May 2023.
Porsche was among the major automakers to pull back from transitioning to electric vehicles last year, citing underwhelming demand. Challenges with making the jump to EVs have cost the company dearly in China, where deliveries have dropped. Porsche disclosed earlier this month that it may oust both its chief financial officer and sales chief.
Last year’s profit margin is a letdown from an initial projection of 15% to 17%. Porsche’s projection for this year also may not be well received, according to Michael Dean, a senior industry analyst at Bloomberg Intelligence.
“Headline guidance for 10%-12% in 2025 will disappoint,” Dean said in a note. Porsche’s guidance implies an adjusted margin in the 12% to 14% range, below analysts’ average estimate for 14.2%, he wrote.
Porsche’s bolstering of its model-customization offerings and increasing investments in subsidiary battery activities also contributed to the profit and net cash flow impairment.
Stephen Reitman, a Bernstein analyst with the equivalent of a hold rating on Porsche, said the “sharp deterioration” in the 2025 outlook is a “major concern.”
“Today’s short but consequential announcement would normally merit in short order a follow-up briefing call by management” to “further explain and reassure an inevitably febrile market,” Reitman wrote in a report. He said Porsche can’t wait until March 12, when it’s scheduled to report earnings.
The €800 million hit doesn’t fully account for Porsche’s shortfall, suggesting some execution gaps, Citi analyst Harald Hendrikse said in a note.
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