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JPMorgan maintains overweight on Stellantis shares despite revenue decline

EditorIsmeta Mujdragic
Published 04/02/2024, 10:26 AM
Updated 04/02/2024, 10:26 AM

On Tuesday, JPMorgan maintained its Overweight rating on Stellantis NV (NYSE:STLA) while observing a projected revenue decrease for the first quarter. Stellantis' revenues are estimated to have dropped by approximately 10% year-over-year, with a 6% decline in volumes. The analysis highlighted a negative geographical mix, stable pricing compared to the previous year, and a 4% negative impact from currency fluctuations during the quarter.

The automotive company faced challenges in North America due to product changeovers and facility downtime, affecting key models such as the RAM 1500 and the Dodge family.

Additionally, a high base effect from the Jeep Cherokee sales in the previous year was noted. JPMorgan expects Stellantis to continue managing inventory levels and pricing power effectively. Inventory reduction in North America is not anticipated until the second half of the year, which is likely to result in a gradual decrease and help maintain stable pricing in the region.

Stellantis is also expected to consider cost reductions in North America, especially if vehicle prices are adjusted downward to decrease incentives while preserving net pricing power. In other markets such as Europe and Latin America, the firm is predicted to perform in line with or slightly below the market.

This strategy aims to safeguard pricing power, potentially with a lower mix of battery electric vehicles (BEVs) compared to the exit rate in 2023, which might reduce the average selling price (ASP) but is intended to protect earnings momentum.

InvestingPro Insights

Amid the projected revenue decrease for Stellantis NV (NYSE:STLA), it's important to consider the company's financial health and market position. According to recent data, Stellantis is trading at a low P/E ratio of 4.39, suggesting that the stock may be undervalued relative to its near-term earnings growth. This aligns with the InvestingPro Tips that highlight the company's low earnings multiple and its status as a prominent player in the Automobiles industry. Additionally, Stellantis' ability to hold more cash than debt on its balance sheet provides it with a level of financial flexibility that could support its operations during challenging economic times.

Looking at the real-time data from InvestingPro, Stellantis boasts a strong market capitalization of 108.0B USD, and its gross profit margin for the last twelve months as of Q4 2023 stands at a healthy 20.15%. This financial stability is further underscored by the company's significant return on assets, which was 9.59% during the same period. For investors seeking dividends, Stellantis offers an attractive dividend yield of 4.36%, with a notable dividend growth of 10.54%.

For those interested in a deeper analysis, there are additional InvestingPro Tips available that provide insights into Stellantis' financial performance and market trends. Readers can take advantage of the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes access to these valuable tips. With 11 more tips listed on InvestingPro, investors can gain a comprehensive understanding of Stellantis' market dynamics and potential investment opportunities.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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