Stellantis Stock: Daring the Future 2030 (NYSE: STLA)
The Italian stock market remains quite undervalued with large caps more discounted than averages. According to the Bloomberg consensus, Borsa Italiana 40 blue chips are trading at an average P/E of 11.9x against the Euro Stoxx 50 companies trading at an average P/E of 13.79x. Stellantis NV is certainly one of them. Thanks to our analysis on Exor, today we are once again focusing our attention on the automotive sector. Stellantis S.A. (NYSE: STLA) is a well-known company that designs, manufactures and distributes automobiles and light commercial vehicles throughout the world. Its main brands are Jeep, Fiat, Maserati, Peugeot, Alfa Romeo and many others.
Following the announcement of its Dare Forward 2030 plan, Stellantis has pledged to become the industry champion in the fight against climate change, achieving zero carbon emissions by 2038. The CEO outlined the plan :
That BEVs represent 100% of sales in Europe and 50% of sales in the United States by the end of the decade;
Have more than 75 BEVs and achieve annual global BEV sales of five million vehicles by 2030;
The plan also builds on the mechanical platforms, powertrain, and hardware architectures announced in recent months. Future e-cars will be based on 4 flexible and modular architectures called STLA (the same as the group’s stock ticker). The 4 STLA platforms will have varying battery life. Stellantis operates in various segments ranging from luxury cars to family cars and faces various customer needs in different geographies;
In addition to the mechanical update, the company is planning three new technology platforms in 2024. At the heart of the transformation into customer-centric services is the new digital architecture for electric vehicles called STLA brain software. It is a fully cloud-integrated service-oriented structure, linking the electronic control units inside the vehicle with the introduction of a high-performance central computer that becomes the heart of the car with fewer chips. (and now it’s essential), fewer control units scattered around the car in order to manage different functions. Thanks to the centralization of hardware, the functionality of each car can be implemented via software in an easier way. This software upgrade can greatly improve the range of a lithium-ion car, while reducing costs and eliminating workshop downtime, which significantly reduces costs for customers and for Stellantis;
Financially speaking, with the new plan, the Company aims to distribute dividends of 25-30% until 2025 and to repurchase up to 5% of the common shares in circulation;
The Company also aims to achieve 100% of the projected synergies of €5 billion by 2024, one year ahead of schedule.
Stellantis closed the first quarter of the year with a turnover of 41.5 billion euros, up 12% compared to the same period of the previous year, although it should be noted that the Consolidated shipments fell 12% to 1.374 million units. The decrease in deliveries is mainly due to the unfulfillment of orders related to the supply of semiconductors which limited production in Europe. Good surprise for the North America zone, the results are higher than the consensus: net sales amounted to 20.69 billion euros against an expected amount of 17.9 billion euros. In the region, Stellantis increased its market share by 30 basis points to 11.7%, thanks in particular to the performance of Jeep. Specifically, in a market down 15%, Stellantis shipments increased 6%.
Despite the drop in shipments which is mainly explained by the shortage of semiconductors which has limited production in Europe, Stellantis confirmed that: “oOur full-year guidance for double-digit adjusted operating margins and positive cash flow is confirmed, despite supply and inflationary headwinds, while good product momentum and strategic partnerships continue to lead the wayexplained CFO Richard Palmer. According to Palmer: “Semiconductor availability is expected to gradually improve in the second half of the year and into 2023, although it remains difficult to predict.“
“We are very satisfied with our results, below the market value of our sharesPalmer pointed out.We can only continue to do our job as best we can.he added, indicating that over time the market will also be able to notice the value of Stellantis and the share price will become more in line with the value of the company. Subsequently, the focus of the conference shifted to commodities and the CFO pointed out that the price increase will have a “impact of approximately 3-3.5% of revenue and will be offset by pricingIn conclusion, Palmer commented on some rivals’ choice to separate electric business from traditional business: “I don’t see great benefits, we have to manage the transition to sustainable mobility and there are clear advantages in keeping the cash generation of both companies together to finance investments.“
Despite a weaker volume outlook, there could be EBIT upside revisions for 2022, our recommendation is a confirmed buy, we like the company’s US exposure and believe the stock deserves better valuation by compared to his peers. The first quarter also posted revenues above expectations thanks to the price mix. Based on EV/EBITDA, we value Stellantis with a share price of €20 and a good dividend payment within the year.
See more of our automotive coverage below:
- Mercedes-Benz: German efficiency on full display
- Nissan: tell me the story
- Genuine Parts Company: love at first sight
- Renault: the most exposed car company in Russia
- Volkswagen: all about long-term trends
- Ferrari: T1 in line with consensus expectations, we reiterate our purchase pitch