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Investing.com -- Renault (EPA:RENA) shares may appear cheap, but their re-rating path is anything but straightforward, according to Jefferies.
While the automaker’s first-half (H1) performance was better than expected, analyst Philippe Houchois warns that “the investment case has shifted from cyclical to re-rating, a much more demanding proposition, notably during a period of CEO transition.”
Renault’s updated guidance confirmed higher second-half margins, and Jefferies nudged its full-year EBIT margin forecast to 7.1%, with H1 and H2 estimates at 6.9% and 7.3%, respectively.
However, the firm kept free cash flow estimates below guidance, citing working capital pressures and increased capital expenditure (capex).
Despite recent upbeat commentary from investor relations, Jefferies maintained its Hold rating and a €48 price target, offering around 18% upside from current levels.
The recent reclassification of Renault’s Nissan (OTC:NSANY) stake from associate to financial investment triggered a €9.5 billion charge. While this had no cash impact, it underscores the difficulty Renault has had retaining long-term value from the alliance.
Should Nissan decide to sell a 5% stake in Renault, Houchois expects the company will buy it back, or else risk “sending a negative valuation signal.”
The analyst thinks that the two automakers should swap their cross holding, citing their respective financial situations. Specifically, he argues that “a lower share count would be more supportive than accumulating cash.”
He estimates that adjusting for the value difference, a swap and cancellation of 10–15% of the cross-holding would effectively reduce Renault’s share count by approximately 6.5–10%.
Meanwhile, the exit of the CEO has revived questions over the company’s strategic direction, especially ahead of its upcoming “Futurama” plan. According to Houchois, messages from the plan “could be mixed if driven by renewed global expansion.”
Stripping out the Nissan stake, which is currently valued at €9.3 per Renault share, Jefferies estimates an implied share price of €33.4.
This leaves Renault trading at 3.7 times estimated 2026 earnings on a core basis excluding Nissan and capitalized R&D—a historically high-margin level.