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Investing.com -- Stellantis N.V. (NYSE:STLA) has been downgraded to “neutral” by UBS Global Research in a note dated Monday, with a new price target of €8.8, down from €16.
This downgrade follows the introduction of a 25% US auto tariff on April 2, which has had a more severe impact on Stellantis compared to its Detroit peers.
Approximately 35% of Stellantis vehicles sold in the US are imported, making it more vulnerable to the tariff.
Additionally, the company has faced multiple quarters of market share loss. Its ambitious plan to regain market share in a potentially shrinking US market is now viewed as less likely to succeed. UBS recently cut its US SAAR forecast by around 9%.
Unlike Ford and General Motors (NYSE:GM), UBS expects Stellantis to experience losses in North America and negative free cash flow.
The inability to successfully turn around the US business, which was central to the previous positive outlook, has led to the downgrade.
The company’s Group Adjusted Operating Income is now nearing break-even, and FCF is expected to remain negative. UBS has reduced its earnings per share forecasts for 2025 and 2026 by roughly 50%, mainly due to the expected negative AOI in North America.
Broader global trade uncertainties and tariffs are also expected to slow economic growth, further impacting Stellantis.
UBS forecasts a net cash outflow of more than €2 billion in 2025, with the possibility of more substantial negative FCF in a bearish production and working capital scenario.
Given this, UBS does not see Stellantis as a stock likely to deliver strong cash returns in the near future, though the company is expected to maintain a net cash position.
There are scenarios where Stellantis could improve, notably if the US auto tariffs are reduced or removed.
However, UBS assigns a low likelihood to this scenario, given the US government’s push to reshore auto production.
The announcement of a new CEO by the end of the first half of 2025 will be another key event, but UBS expects that important strategic decisions will take time to materialize.
On a positive note, Stellantis is operating at about 50% capacity utilization in the US, meaning reshoring production from Mexico and Canada could be relatively straightforward, though it would require major investments in tooling and restructuring the North American footprint.
UBS’s updated valuation reflects the revised AOI forecasts and anticipates €4 billion in restructuring and reshoring costs for North America.
At the new price target, Stellantis would trade at 6.2x P/E for 2026 estimates. With limited visibility on dividends and share buybacks likely delayed, the stock’s near-term prospects remain uncertain.