Stellantis attempts recovery but Citi advises caution

 (Il Sole 24 Ore Radiocor) - After an uncertain start, Stellantis in Piazza Affari has taken the road to the upside, attempting to recover the losses of recent sessions. Since 28 May, in fact, the shares have been suffering, so much so that they have left more than 11% on the parterre, moving a long way from the top of the year reached in mid-April in the EUR 7.44 area.

Citi, however, continues to recommend caution on the auto group's shares. In a report entitled 'Slow progress: new products will take time', the US bank maintains a 'Neutral' recommendation on Stellantis, cutting its price target to EUR 7.2 from the previous EUR 7.5. Citi analysts point out that the Stellantis has suffered in recent sessions, affected by lower-than-expected US sales data and concerns about a possible interest rate hike by the Federal Reserve, which is negative for the entire consumer sector. In addition, the experts said that 'the indications on profitability and other key indicators announced by management during the Capital Market Days were not sufficient to support a more constructive view on the stock, although a growth trajectory well above expectations was outlined in the business plan'.

Citi is also concerned about difficult competitive conditions looming for the group, especially in Europe and potentially in other emerging markets, in light of the expansion of Chinese manufacturers' export capacity. Moreover, the bank warns, if market sentiment deteriorates, the low industrial margins of Stellantis' automotive business, negative free cash flow and still weak fundamentals could further discourage investors, driving them away from the stock. Certainly, Citi admits, some investors might be tempted to buy the stock from a long-term perspective, betting on the improvement that management says should gradually emerge over the next few years. But for the investment bank, most investors are unlikely to return to buying the group's shares before observing an improvement in the immediate term, quarter after quarter. This is why Citi recommends caution.