I gave my thoughts on the Volkswagen emissions scandal to InvestorPlace (see Is Volkswagen Stock Cheap Enough to Buy After Emissions Scandal?)
Here’s an excerpt:
This is ugly. Shares of Volkswagen (VLKAY) were down nearly 20% Monday morning after news broke that the world’s largest automaker had systematically cheated on U.S. emissions tests to make its diesel engines appear more eco-friendly than they really are.
Under the Clean Air Act, Volkswagen could be on the hook for fines of $37,500 per car affected. If federal prosecutors really want to put the screws to Volkswagen, that would amount to an $18 billion fine. To put that in perspective, Volkswagen stock has a market cap of 63 billion euros, or about $71 billion, so we’re talking about a fine equal to a quarter of the company’s value.
For an idea of what may be in store for Volkswagen stock, consider the case of Vereit (VER), formerly American Realty Capital Properties. Following an accounting scandal last fall, the stock lost roughly a third of its value. There were investigations… and audits… and lots of finger pointing.
Management got the boot, and the company was even renamed to give it fresh start. By all accounts, the slate has been wiped clean, and Vereit is an attractive stock trading at a fantastic price.
Yet nearly a year after the scandal broke, VER still trades close to its 52-week low. Reputations take time to rebuild.
So, is Volkswagen stock cheap? Yes, it is. But is it a buy today? I would say no.
By all means, keep an eye on Volkswagen stock. But I would recommend waiting at least another couple months before pulling the trigger and buying.
You can read the full article here.