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Volkswagen share price forecast: significant upside potential on positive technicals and fundamentals

By Alejandro Arrieche

18:05, 14 July 2020

Volkswagen share price forecast

Volkswagen share price history shows that the stock has been on an uptrend since bottoming at around €87 per share in mid-March, following the February sell-off caused by the Covid-19 pandemic.

Since then, shares of the German carmaker have registered a solid 55 per cent gain in less than four months, following a broad market rally fuelled by massive liquidity injections from central banks around the world – including the ECB – and a strong rebound in vehicle sales, especially in Europe and Asia.

However, this uptrend has lost some steam lately, as bad news from the United States related to a spike in coronavirus cases has put the rally on standby, even though the situation in Europe and Asia – two of the biggest markets for VW – continues to look promising.

Meanwhile, certain technical and fundamental indicators are saying that this slowdown in the uptrend may be a good entry point to invest in Volkswagen stock, as the likelihood of a second wave of the virus in Europe remains low and the impact of the situation in the United States will probably be limited for VW.

Volkswagen stock analysis

Passenger vehicle sales, the largest revenue segment for VW, have already rebounded in the three most important regions where the company commercialises its vehicles: the US, China and Europe.

Even though lockdown measures implemented to contain the Covid-19 pandemic have forced people to stay at home while the virus is contained, vehicle sales seem to have already bottomed in April and are now on track to recover to their pre-virus levels.

This is possibly the most important trend to keep in mind to understand what could be next for VOW3 stock. Even though the situation in the US could cause some hesitation from investors, its effect on the carmaker could be significantly limited and, therefore, the stock could be headed to a break once investors realise that this turn of events is not that bad for VW.

Volkswagen share price forecast

The chart above shows Volkswagen stock performance and how the uptrend lost some traction since early June, as news that virus cases in the US had spiked once again caused a big drop in the price of VW shares.

Another key highlight of this chart is that, similar to what has happened to other value stocks, VW shares failed to push above their 200 DMA, as investors weighed the impact that another wave of lockdowns in the US could have on both revenues and profits of the German vehicle manufacturer.

Now, the most interesting thing about this weekly chart is the symmetric shape of the triangle that we can see forming since last week’s session, which points to a consolidation that is about to break out in the next few sessions.

Volkswagen share price forecast

On that note, we can see some upward momentum on both the RSI and the MACD, which strengthens the thesis that VOW3 shares could be headed to a significant bullish breakout once the stock comes out of this consolidation period.

A similar situation can be seen on the one-day chart, featuring the same symmetric triangle, an upward movement in the RSI and a MACD that just pushed above the signal line.

Meanwhile, the recent pullback has sent the stock down to its short-term moving averages, which have served as strong support in recent sessions.

This could be another bullish indication and a great entry point if the stock is in fact about to breakout, as traders could enjoy the full ride towards the 200 DMA.

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Volkswagen share price forecast

Analysts have been significantly bullish on Volkswagen lately, as reflected by the recommendations gathered by the Wall Street Journal.

The survey shows that 17 out of 24 analysts polled are currently rating the stock as a buy, while six  of them are saying WV is a hold, and only one has qualified the stock as underweight/underperform.

Volkswagen stock price forecast

Meanwhile, the Volkswagen stock forecast from the same analysts resulted in an average price target of €161.64, which would result in a 16 per cent upside over the next 12 months, while the lowest target was set at €120 per share and the highest at €214.

Volkswagen stock forecast

Volkswagen shares: buy, sell or hold?

At this point, there seem to be no negative catalysts that could push Volkswagen shares below their short-term moving averages, which is the level at which they are trading now.

The virus situation in Europe and Asia seems to be contained and the likelihood of a second wave remains low, at least for now.

Of course, there’s still significant uncertainty as to how the economic fallout caused by two months of strict lockdowns will impact vehicle sales over the long term, but that’s not something investors should be concerned with at this point, especially if your holding period is shorter than one to three months.

Volkswagen share price forecast

Based on the technical elements analysed above, a short-term Volkswagen share price forecast could put the stock at €140 in the next few days as long as VW shares manage to break through the symmetric triangle that has formed during this consolidation period.

A resistance level would come at €150, probably coinciding with the stock’s 200 DMA at that point.

Is Volkswagen stock a good buy?

Nothing seems to say otherwise, with both fundamentals and technical indicators pointing to what could be some upcoming positive momentum for this German carmaker.

Sure, some risks are looming on the backdrop, but none seems to be a short-term threat that could possibly pull back the stock below its short-term moving averages.

However, a stop-loss at some point below the 50 or 20 DMA would be advised, of course, as the aftermath of a consolidation is a highly volatile moment where a break could occur in any direction.

Even though my Volkswagen share price forecast points to an upward move, the situation in the US markets could drag the stock down if investors decide to move to low-risk assets and off equities in response to the virus threat.

Markets in this article

VOW3
Volkswagen AG (Pfd)
123.00 USD
1.35 +1.110%

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