Shares of Stellantis NV (STLA) are down 11% in the past week as the Netherlands-based automaker was forced to lower its full-year forecast as costs are climbing while production is falling.
The company was originally expecting to deliver a double-digit profit percentage for the fiscal year, but now, the profit guidance has been brought down to just 5.5% to 7%.
Similarly, the industrial free cash flow for Stellantis is expected to fall between negative $5.6 billion to $11.2 billion. The original forecast called for positive free cash flow.
It’s worth noting that the issues Stellantis is facing are fairly widespread across the auto industry as a whole. Volkswagen just had to issue its own warning recently while Mercedes, BMW, Volvo, Aston Martin, and others all struggle with the current macroeconomic environment.
But, CEO Carlos Tavares in particular has been under fire from investors, dealers, and unions alike. Sales continue to dwindle, and the outdated vehicle lineup for the US and slow moving inventory aren’t going to help.
Tavares is unlikely to return to the helm when his contract expires in 2026. Chairman John Elkann is already looking for a successor. However, that doesn’t mean Tavares isn’t working to turn the ship around while he still can.
The company has aggressive plans to improve the state of supply for dealers. It was initially anticipating having no more than 330,000 units of dealer inventory by Q1 2024, but is now trying to get that done before year end. This will involve producing fewer vehicles while increasing promotional spending.
This forecast revision has been highly contentious, as experts suggest it should have been issued far sooner and that the original guidance was overly ambitious in the first place. This has led analysts to slash their price targets on the stock.
STLA has plummeted 40% year-to-date and doesn’t look to be turning things around anytime soon. So, is this your sign to cut losses on the stock if you haven’t already? We’ve taken a look through the VectorVest stock analysis software and found 3 things to consider.
STLA Still Has Very Good Upside Potential and Good Safety, But Very Poor Timing Suggests it May Be Time to SELL
VectorVest is a proprietary stock rating system designed to save you time and stress while empowering you to win more trades. It does this by distilling complex technical and fundamental data into 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT).
Each rating is placed on a scale of 0.00-2.00 with 1.00 being the average, making interpretation quick and easy. It gets even better, though.
You’re given a clear buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. As for STLA, here’s what you need to know:
- Very Good Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. This makes it a far superior indicator than the typical comparison of price to value alone. STLA has a very good RV rating of 1.34. The stock is undervalued, with a current value of $18.89 per share.
- Good Safety: The RS rating is a risk indicator. It’s computed from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. STLA has a good RS rating of 1.11.
- Very Poor Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year. The RT rating of 0.44 is very poor for STLA, which is the biggest issue for this stock - the continued downward pressure on its price.
The overall VST rating of 1.00 is right at the average, and is considered to be relatively fair. However, the stock is rated a SELL as it continues to lose value, with no end in sight. Learn more about this situation, or any other investment opportunity, with a free stock analysis today!
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VectorVest advocates buying safe, undervalued stocks, rising in price. STLA had to cut its profit outlook for the full year and is now expecting to bleed more and more cash in an effort to shore up supply issues. The stock itself has very good upside potential and good safety, but very poor timing is holding it back right now.
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