Investing.com – Bernstein initiated coverage on Stellantis stock (BIT:) with a “Market Perform” rating and target price of 22 euros or $23.50.
The valuation represents an increase of 18.7% compared to the closing price of the shares on June 27 (18.544 euros), but it would not be enough to bring the stock back to the 27 euros per share reached in March.
Moreover, also based on the forecasts that emerged from the recent Capital Market Days, analysts see increasing risks for short-term results.
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A difficult 2024 for Stellantis
“Market normalization and price headwinds in the US will weigh on FY ’24 earnings,” Bernstein explains, “while uncertainty over EV margins and increasing competition outside the US will hinder further revaluation.”
Market experts, however, recognize the progress made by the car manufacturer towards the long-term objectives of the Dare Forward 2030 strategic plan. “The company – we read in the report – is starting to reliably produce a Free Cash Flow of over 10 billion euros. This in turn supports the dividend policy and buyback programmes, which according to our forecasts will add 6% to EPS each year”.
As regards the short term, however, what weighs is the excessively high level of inventories in the United States, where Stellantis has increased prices more aggressively than its competitors and is therefore in difficulty. A situation which, according to analysts, will cost around -25% per year on earnings per share in the 2024 financial year.
Return to growth in 2025
But once this year’s difficulties have been overcome, Bernstein expects a return to growth for the group led by CEO Carlos Tavares. “We expect the market to want greater clarity on the problems of ’24 before recognizing the medium-term upside, but from 2025 onwards – they conclude -, we expect an increase in revenues and margins: net profit will rise by 4% annually and, including the effect of buybacks, we expect EPS to increase by 12% annually between 2024 and 2027”.
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