Volkswagen shares are practically free and Rivian is cheap. Ratings can make no sense.

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Volkswagen

Stocks can feel pointless at times, as can EV startup stocks

Rivian Automotive
.

But for investors, market disruptions can sometimes mean opportunities.

Volkswagen

(Ticker: VOW.Germany) Shares jumped after the company on Friday reported Figures that it had already published three weeks ago. Its shares rose 7.4% in overseas trading, while its US depositary receipts were up 5.5% in early trade. The

S&P500
And

Dow Jones industry average
increased by 1.3% and 1.4% respectively.

The German auto giant’s stock could get a boost as its annual dividend rises about 16% to €8.70 per common share from €7.50 a year earlier. Another possible factor: VW expects to ship about 9.5 million vehicles in 2023, up from about 8.9 billion in 2022. Given that, though, that’s not a huge surprise

Stellantis

(STLA) and other US and European automakers have reported.

It’s VW’s valuation that deserves a closer look. Even with Friday’s gains, VW shares are trading at about 3.7 times estimated 2023 earnings. VW shares are actually cheaper: In a way, they’re practically free.

VW owns around 75% of it

Porsche AG

(P911.Germany), the manufacturer of Porsche sports cars. That stake is worth $83 billion, while VW’s total market cap is around $80 billion.

Excluding Porsche’s profits, VW generated about $16 billion in operating profit last year. That’s more than its $14.5 billion in operating income

General Motors

(GM) in 2022, and GM has a market cap of approximately $56 billion.

One reason for the discount is that VW is complicated with a number of brands including Audi, Lamborghini and Bentley. It has many preferred and common stocks and many owners including joint ventures and another named entity

Porsche automobile

(PAH3.Germany). That’s a holding company that owns VW shares, not the Porsche car company.

Some discount for complexity is warranted, but for free?

VW isn’t the only stock in the auto market with an enigmatic valuation. Rivian (RIVN) shares fell 18% earlier this week after the company’s forecasts for 2023 production missed Wall Street estimates. Shares were trading at $15.91 early Friday, but Rivian has more than $13 per share in cash on the books. The stock trades for around $2.60 per share on a non-cash basis.

That’s a multiple of 0.5 times the estimated sales for 2023.

Tesla

(TSLA), which is profitable, is trading at about six times sales. Rivian uses about $6 billion in cash annually.

Value investors might want to put up with VW’s complexities and take a look at the stock. Growth investors should check out Rivian. There’s no guarantee that either stock will work, but sometimes market oddities work in investors’ favour.

Write to Al Root at allen.root@dowjones.com