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On Tuesday, Citi analysts, led by Harald Hendrikse, adjusted their outlook on Stellantis NV (NYSE:STLA:IM) (NYSE: STLA), reducing the price target to €12.00 from the previous €13.00, while keeping a Neutral rating on the stock. The revision comes as Stellantis trades near its 52-week low at $12.34, having declined over 51% in the past year. The revision follows a detailed assessment of the automaker’s earnings report and its forward-looking guidance through fiscal year 2025 (FY25). According to InvestingPro data, the stock currently offers a significant dividend yield of 9.74%.
Stellantis’ recent financial disclosures and projections have shed light on the expected trajectory of the company’s earnings recovery. Despite trading at an attractive P/E ratio of 6.17x, the company faces challenges with weak gross profit margins of 13.31% and a significant 17.23% revenue decline over the last twelve months. Citi analysts acknowledge the potential for improvement from the second half of 2024 (2H 24) levels but also caution about several risks ahead. They anticipate that first half of 2025 (1H 25) earnings might remain subdued, starting from a notably low base in 2H 24, and before any substantial benefits from new products materialize.
The analysis suggests that while the launch of the new Cherokee in the second half of 2025 (2H 25) may provide a boost, the impact is expected to be somewhat limited. Additionally, the firm projects that pricing in the United States and potentially in the European Union will likely continue to be sharply negative year-over-year. The analysts also express concern over the long-term adjusted operating income (AOI) margin recovery, indicating that without more decisive cost reduction measures, significant improvement is unlikely.
Citi has updated its model for Stellantis, revising the FY25E AOI margin down to 4.8%, with an anticipated increase to 6.5% in FY26E. However, they predict that earnings per share (EPS) will remain significantly below approximately €3. As a result of these adjustments and considerations, the price target has been lowered to €12.00.
This updated target reflects the analysts’ measured perspective on Stellantis’ financial prospects, balancing the potential for recovery with the challenges that may impede rapid earnings growth. InvestingPro analysis suggests the stock is currently undervalued, with 12 additional ProTips available to subscribers, including detailed insights on the company’s financial health and market position. For comprehensive analysis of Stellantis and 1,400+ other stocks, access the full Pro Research Report on InvestingPro.
In other recent news, Stellantis has unveiled its STLA AutoDrive, a new automated driving system designed to handle driving tasks autonomously at speeds up to 37 mph. This system aims to enhance the driving experience by managing speed, steering, and braking, even in challenging conditions. It is part of Stellantis’ broader technology strategy and aligns with its environmental goals. Meanwhile, President Donald Trump has announced plans to impose tariffs on imported cars, which are expected to be implemented soon. These tariffs are part of a broader strategy to address trade imbalances and create a level playing field in international trade. IONNA, a joint venture involving several major automakers, has transitioned to a full-scale national release, adding over 1,000 charging bays across the United States. This expansion marks a significant milestone in the American automotive industry, emphasizing technological innovation and job creation. Additionally, Trump is considering a 10% tariff on the European Union, which could escalate global trade tensions. The potential tariffs follow recent levies on imports from other countries and could lead to retaliatory measures from the EU.
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