Volvo shares rise as UBS upgrades stock to ‘neutral’ amid upgrade to 2025 outlook by Investing.com
Investing.com — Shares of Volvo (ST:) rose on Friday after analysts at UBS upgraded the stock to a “neutral” rating from a “sell.”
At 7:34 am (1134 GMT), Volvo was trading 1.9% higher at SEK 274.40.
This rating revision reflects UBS’s assessment that Volvo’s current share price more accurately represents its risk and reward outlook, taking into account the mixed signals in the market and the expected improvement in performance by 2025.
UBS analysts pointed out that although the heavy-duty truck market in Europe and North America remains a challenge, the company’s fundamentals and market position have changed to match the current economic conditions, balancing near-term challenges with long-term sustainability.
“We believe the 2025 truck forecasts provided by Volvo & PACCAR (NASDAQ: ) provided limited reassurance following the industry’s first warning of how deep the downturn could be,” UBS analysts said.
While the expected downturn in the trucking market across Europe and North America remains a concern, data shows it may not be as long or as severe as previously feared.
The UBS analysis suggests that conditions in Volvo’s main markets should improve gradually in the second half of 2025, while North America may experience an increase in sales due to the “advance purchase” effect.
The term refers to an expected increase in truck orders ahead of the upcoming EPA regulations, which are expected to boost demand in late 2025 as companies look to expand their fleets before the regulations take effect.
Volvo’s European truck market is expected to stabilize in mid-2025, with a possible slowdown from continued economic slowdown in countries such as Germany but offset by stronger demand in regions such as the UK.
The company has adjusted production levels to match demand, limiting over-buying and thus reducing financial difficulties even in the midst of fluctuating order volumes.
This inventory orientation, combined with Volvo’s strong backlog of its Mack trucks in North America, puts the company in a strong position despite the downturn in the highway segment of the truck market.
UBS went on to point out that Volvo’s pricing remained stable, which helped maintain profitability despite continued market pressure.
Unlike competitors who may lower prices to capture market share, Volvo has chosen to keep prices stable in a low-growth environment, which UBS believes will prevent a race to the bottom on margins.
The UBS report also raised Volvo’s price target from SEK 263 to SEK 274, valuing the company at 7.3x EV/EBIT multiples over the next 12 months, close to its historical average, yet slightly down.
This revised estimate puts Volvo’s premium over its truck peers at 6%, compared to the standard premium of 8%.
UBS analysts noted that while this shows caution remains, the revised targets include Volvo’s relevance to the industry’s current challenges and growth potential towards the end of 2025.
UBS has flagged upcoming events that could impact Volvo’s stock performance, including North American order figures, expected in late October, and more strategic details likely to be discussed at Volvo’s Market Day on November 14.
These events are expected to shed more light on Volvo’s ongoing reforms and market share growth in the coming year.
UBS reiterated that while the upgraded rating does not indicate a definite buy, it does indicate a rebalancing of the truck market as Volvo’s risk-reward profile improves, especially as macroeconomic indicators show initial signs of improvement.
