Deutsche Bank, JPMorgan downgrade Volkswagen on emissions scandal

LONDON (ShareCast) - (ShareCast News) - Deutsche Bank (Other OTC: DBAGF - news) cut Volkswagen (Other OTC: VLKAF - news) to 'hold' from 'buy' and slashed the price target to €130 from €260 as it said the car maker's emissions scandal was "an investor's nightmare" with uncertainty on all levels. "After VW lost around €30bn of its market value in two days, it might strike as a buying opportunity. However, we stress that the full magnitude of the emission scandal is likely to remain uncertain for much longer," the bank said.

So far, DB said the legal fines will be painful, impossible to quantify and potentially remain a topic for years. In addition, it said the impact on the operational business poses even higher risks for future cash flows.

It (Other OTC: ITGL - news) cut its earnings per share estimates materially over 2015-2017 to account for a €5bn legal fine, recall costs, lower growth and pricing pressure from brand damage.

Meanwhile, JPMorgan Cazenove downgraded its stance on VW's preference shares to 'neutral' from 'overweight', cutting the price target to €179 from €253, saying it cannot rule out additional engine investigations and does not have visibility over the total liability for VW.

"We believe the longer-term equity story of VW remains intact and continue to see value in the stock longer term." JPM added that having looked into VW's engine families, the recall will hit most brands - VW, Audi (Other OTC: AUDVF - news) , Skoda and Seat - excluding the A8 in the Audi family.

At 0910 BST, VW shares were down 0.4% at €110.75.