Porsche's Crossroads: Cost Pressures and Strategic Shifts Weigh on Stock

The German automaker Porsche Automobil Holding SE (OTCMKTS: POAHY) faces a pivotal moment as analysts reassess its trajectory amid rising costs, geopolitical headwinds, and a slower-than-expected transition to electric vehicles (EVs). Oddo BHF’s recent decision to slash its 2025 target price from €90 to €75—while maintaining its “Outperform” rating—highlights the tension between Porsche’s long-term potential and near-term execution challenges. Here’s what investors need to know.

The Downgrade Context: Cost Pressures and Strategic Realities

Oddo BHF’s revised target reflects concerns over sustainably higher costs, dilution from EV investments, and a lack of recovery in China’s luxury EV market. Porsche’s Q1 2025 results underscored these challenges:
- Revenue fell 1.7% to €8.86 billion amid a 7.9% drop in global deliveries.
- Operating profit plummeted 40.6% to €760 million, with margins collapsing to 8.6% from 14.2% a year earlier.
- Special expenses rose to €1.3 billion for 2025, driven by abandoned battery production plans and workforce restructuring.

The firm now forecasts 2025 sales revenue of €37–38 billion (down from €39–40 billion) and an operating return of 6.5–8.5%, a stark drop from its earlier 10–12% guidance.

Key Drivers of the Downgrade

1. Battery Electric Vehicle (BEV) Transition Costs

Porsche’s decision to cancel Cellforce Group’s high-performance battery expansion—once a cornerstone of its EV strategy—adds €700 million in one-time costs. While this pivot aims to reduce complexity, it underscores the financial burden of competing in a rapidly evolving EV landscape dominated by rivals like Tesla and BYD.

2. China’s Luxury EV Slump

Deliveries in China plunged 42% in Q1 2025, reflecting intense competition and shifting consumer preferences. Porsche’s “value-over-volume” strategy—prioritizing pricing discipline over sales growth—adds to near-term margin pressures.

3. US Tariffs and Supply Chain Headaches

A 25% U.S. import tariff introduced in April 2025 has already impacted April and May results, with Porsche warning of potential price hikes to offset margin erosion. Supply chain inefficiencies, particularly in battery sourcing, further strain profitability.

Institutional Sentiment: Funds Are Backing Away

Institutional investors are voting with their wallets:
- Total ownership fell 4.27% over three months to 9,751K shares.
- Major funds like Fidelity’s FINVX reduced holdings by 18.41%, while the iShares EAFE ETF (IEFA) trimmed its stake by 5.96%.
- The average portfolio allocation to Porsche dropped to 0.16%, signaling reduced confidence.

The stock closed at $3.35 on April 25, near its 52-week low of $3.30, reflecting investor pessimism despite a 22.4% upside implied by the April 2 average analyst price target of 40.21 GBX/share.

Broader Industry Headwinds

Porsche’s struggles mirror broader challenges in the luxury EV sector:
- EV adoption in China has slowed due to price wars and consumer hesitancy toward premium EVs.
- Geopolitical risks, including trade tensions and supply chain bottlenecks, add uncertainty to global automakers’ profit forecasts.

Conclusion: A Stock at a Crossroads

Porsche’s shares face near-term headwinds, but long-term opportunities remain. The automaker’s strong liquidity (€8.7 billion net cash) and electrification milestones—such as the all-electric Macan’s 14,185 deliveries in Q1—suggest resilience. However, the path forward hinges on:
- Cost discipline: Reducing special expenses and stabilizing margins.
- China recovery: Turning around its largest market through tailored strategies like limited-edition models.
- US tariff mitigation: Balancing price hikes and supply chain efficiencies.

For now, the €75 target reflects reality: investors are pricing in execution risks. Yet, with a 2026 EBIT estimate 15% below consensus, Oddo BHF’s cautious stance highlights that patience is required. Until Porsche demonstrates margin stabilization and market share recovery, the stock may remain under pressure.

The verdict? Hold for now—but keep an eye on Q3 results and China’s EV market dynamics. The road ahead is bumpy, but Porsche’s brand power and electrification roadmap could yet steer it back to growth.