Barclays starts Stellantis at Overweight, forecasting modest growth amidst challenges By Investing.com
Barclays initiated coverage of Stellantis (NYSE:STLA) with an Overweight rating and set their 12-month price target on the stock at €22.50 (€1 = $1.05).
STLA ranks high among EU/US OEMs in terms of profitability, cash flow, dividends, and efficient use of capital, making it a favored choice for many investors. However, analysts at Barclays believe that due to the overall lack of interest in the EU Auto sector, its position is relatively weak.
Analysts at Barclays predict a margin adjustment, decreasing from approximately 13% to around 11% for STLA. This adjustment takes into account both industry-wide price stabilization and STLA’s unique challenges, such as BEV dilution and an increase in depreciation and amortization.
“Overall, we acknowledge that STLA already trades near all-time highs, despite UAW strike uncertainties and the fact that long-term DF30 volume and market share targets appear challenging,” analysts at Barclays said in a note.
However, regardless of “tactically conservative” estimates, Barclays is still approximately 10% above consensus, indicating robust earnings resilience.
On October 19, STLA is scheduled to host a Light Commercial Vehicles Capital Market Day in Spain, a group known for its high growth and high margins, and a segment analysts at Barclays believe the market currently undervalues.
Additionally, on October 31, Stellantis will release its Q3 revenue report, which analysts anticipate will reflect the initial impacts of the ongoing UAW strike.
Overall, despite the automaker’s high-quality performance, analysts at Barclays consider the valuation to be reasonably priced relative to its peer group. Given the current market situation, with the stock trading within 2% of its all-time highs, investor interest might be somewhat subdued, as it is expected that STLA will not report a clear set of earnings until July or August 2024.
Analysts at Barclays predict that Stellantis will experience revenue growth, reaching €189.3 billion in 2023, reflecting a 5% year-on-year increase. This growth is expected to be primarily driven by a rise in consolidated shipments, reaching 6.1 million units and growing by 5% year-on-year, as well as a 3% increase in pricing, which will offset the negative effects of foreign exchange fluctuations.
Shares of STLA are down 0.48% in pre-market trading on Tuesday.
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