Bank of America reiterated a Buy rating on Stellantis (NYSE:STLA) and raised their 12-month price target on the automotive stock to $23.00 (from $20.00) ahead of the company’s 3Q report. Stellantis will report their 3Q sales results on October 31st.
The focus for Q4 and the 2024 outlook is expected to be on the order book, pricing, product mix, and inventory levels.
Q3 data indicates a decline in volumes compared to the previous quarter, mainly due to seasonal effects in Europe and, to a lesser extent, strikes by the UAW in the US.
Bank of America analysts wrote in a note, “Only c22% of production has been affected and STLA had built buffer inventory ahead of the strike. Accordingly, if strikes were to end soon without major escalation, there could be c€1bn upside to our forecast.”
Adjusted EBIT estimates for FY23 have increased by €3.7bn (17.5%) to €24.7bn. Despite this improvement, it would require a decline of around €3.5bn approximately, or €0.4bn Y/Y in the second half of 2023.
Factoring in an anticipated €1bn boost from synergies in the latter half, the underlying profit would need to decrease by about €1.4bn year-on-year.
Bank of America has increased its EPS forecasts by 6% and 12% for 2023 and 2024, respectively. These projections currently stand 8% and 5% higher than the consensus estimates. The valuation is still reasonable, and Stellantis is offering an appealing dividend yield of approximately 9%.
Shares of STLA are down 0.15% in mid-day trading on Friday.