Stellantis stock is in a bear market as key brands move to oblivion

Stellantis (STLA) stock price has suffered a harsh reversal and moved into a deep bear market as concerns about its key brands remain. Its American ADRs dropped to $15 this month, down by over 39% from its highest level in 2023. This pullback has brought its market cap to about $50 billion, making it bigger than Ford and slightly below General Motors.

Stellantis faces major challenges

Stellantis is one of the top global automakers globally. It owns some of the top brands like Jeep, Chrysler, Dodge, Maserati, and Peugeot. 

The company is facing major challenges as most of its key brands continue underperforming, especially in the United States.

For example, the number of Chrysler, Alfa Romeo, and Fiat sold in the US has dived, and there are serious concerns about whether they will survive there in the long term. Alfa Romeo, which was once attempting to compete with BMW, has been left far much behind. 

Chrysler, a company that used to be a high-selling vehicle brand, has lost its relevance and the number of shipments has dived. 

The same is true with its other luxury brands like Maserati, which have been left much behind by the likes of Ferrari and Porsche. Its mass-market brands like Citroen and Lancia have also lost market share over the years.

This trend has been shown in the recent delivery numbers. The company’s Q1 shipments came in at 1.3 million, down by 10% from the same period in 2023. Sales to customers stood at 1.5 million, unchanged from last year. 

Stellantis other big challenge is in its ambition to become a major player in the electric vehicle industry. In this case, the company has launched several EV brands as it tries to compete with traditional automakers and newer brands like Xpeng, Tesla, and Nio. 

Its delivery report showed that its global battery electric vehicle (BEV) sales rose by 8%, meaning that demand is slowing. In the latest quarterly results, the management noted that one of the biggest challenges was the uncertainty on BEV adoption rates.

As a European brand, Stellantis has been moving to the EV industry at a faster rate than American companies like General Motors and Ford. US firms have also been quick to cut their losses. Just last week, Ford axed plans to build a three-row electric SUV and delayed a new version of the electric trucks.

To be clear: Stellantis still owns some highly popular brands like Jeep and RAM. It also owns Dodge, one of the top muscle car brands in the US. Its other brands like Fiat, Peugeot, and Vauxhall are highly popular in Europe.

Stellantis revenue growth

The most recent financial results showed that consolidated Stellantis shipments dropped from over 3.2 million in the first half of 2023 to  2.8 million. Net revenue fell from over €98 billion to over €85 billion. 

Stellantis’ adjusted operating income moved from over €14.1 billion to over €8.4 billion. In the last quarter, the company’s shipments fell by 11% to €1.37 billion while its net revenue fell by 12% to €41.7 billion.

Looking ahead, Stellantis will likely benefit from the ongoing interest rate cuts in Europe and potentially, in the United States. Historically, customers are more incentivised to buy new vehicles when rates start falling. 

However, the company is facing more challenges. For one, the European Union has removed the proposed tariffs on Chinese electric vehicles. The implication is that many Chinese companies like Nio, BYD, and Xpeng will continue gaining market share in the bloc, hitting companies like Renault and Stellantis.

The other big issue is that the company is not doing well in North America, a key market where revenue rose to €22.8 billion. It risks losing market share to Detroit automakers. 

Positively, Stellantis has become a cheap company trading at a forward P/E ratio of 3.54, lower than companies like Toyota, Ford, Honda, and General Motors. This lower valuation multiple is because investors don’t expect it to have substantial growth going forward.

Stellantis stock price analysis

The weekly chart shows that the STLA share price peaked at $27.60 in June and has now fallen by 40%. It is also hovering near the lowest point since August 2023. 

The stock has also dropped below the 50-week and 100-week moving averages and is hovering above the 50% Fibonacci Retracement point. It has also moved to the bottom of trading range of the Murrey Math Lines.

Therefore, the stock will likely resume the downtrend and retest the support at $12.50, the 61.8% Fibonacci Retracement point.