Tuesday, September 29, 2015

Volkswagen stock sinks below $100, how bad is emissions scandal really?

VW logo courtesy of Wikipedia
The world's largest automaker is in trouble. Obviously in big trouble given the fact that today Volkswagen's stock price now trades below $100 due to the emissions scandal. The car manufacturer's stock is very volatile at the moment, and yes, no one really knows where it's heading. Is it cheap enough to buy, or should we all sell short? I'm going for the latter. With so many claims and lawsuits I highly doubt that they will be able to get out of this mess. Especially in such a competitive market as the auto industry. How low will it go? It's hard to tell since there are still buyers of this stock (don't ask what possesses them to do so). I'll be very surprised if Volkswagen can crawl back up to over $100 a share again. This emissions scandal is huge, and is definitely a big deal that will certainly reflect on its stock price.

Stock chart courtesy of Bloomberg
Will Volkswagen go under? I don't think anytime soon, but their share price will most likely go down even further. Reason why I shorted (again) today now that the psychological barrier of $100 has been broken. Reorganization etc, might be a good option in the short term, but to gain the trust of the consumers and investors again is going to be a tough one for Volkswagen. On a side note, keep an eye out on other car manufacturers such as Audi, who knows which other automakers are going to have an emissions scandal. In my opinion Volkswagen is not going to be the last. My target: $90 - $85 depending on how rapid the drop is going to be.

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