Porsche AG Share Price Soared: Here’s Why You Should Not Buy

Porsche AG share price was a bit volatile on its first day of trading. After soaring by more than 5%, the stock erased most of those gains and closed at 82.50 euros, which was in line with the IPO price. The performance gives the company a market value of over 73 billion euros, making it one of the top five biggest automakers in the world. The others are Volkswagen, Mercedes, Toyota, and Tesla

Porsche IPO details

Porsche AG is a leading car manufacturer that competes with the likes of Ferrari and Aston Martin. The firm focuses on the luxury market, which is seen as being recession-proof. Besides, the number of wealthy people who can afford such cars is constantly growing. 

As a result, the company’s business has been growing, helped by its iconic Porsche 911 and the new electric models. In 2021, the firm’s revenue was more than 33 billion euros while its EBITDA margin was 24.5%. This means that the company has the financials to defend its pricey valuation.

In the first half of the year, Porsche’s revenue rose from 16.52 billion in 2021 to over 17.9 billion in 2022. Its automotive free cash flow was over 2.8 billion euro. The management said that its top-selling brand was Cayenne, which sold 44,600 cars during this period. It was followed by Macan, 911 Taycan, Panamera, and Cayman. Still, 911 is its most profitable brand. 

Will the Porsche AG share price rise?

So, you might be wondering whether to buy or ignore Porsche shares. In my view, I believe that the stock performed how it was supposed to on its first day of trading. It jumped as demand for its shares rose. 

According to Bloomberg, the company attracted so much demand that almost half of the investors who put in orders were not allocated shares. It received orders from about 650 investors most of whose shares were not allocated.

Still, this hype will likely lead to many retail investors rushing to buy the stock. In my view, I believe that the Porsche share price will pull back sharply in the coming months as demand for the stock wanes. Besides, it is a difficult time for German automakers as competition rise and costs of doing business soar.

Further, other luxury car stocks have struggled this year. Aston Martin’s share price has collapsed by more than 70% YTD while Ferrari stock has lost 30%. Therefore, potential investors should wait before buying the stock.

Also, it is worth noting who bought the stock at IPO. 75% of the funds were bought by four large investors, including Qatar Investment Authority and Norway wealth fund.

This is not investment advice.