Stock market: Renault fully recovering but Stellantis in trouble, what to do?

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Stellantis and Renault shares have seen very different trajectories on the stock market since March. Will the phenomenon last? How can we compare to the two French automotive giants that our readers have benefited from in recent years?


© © SP/Renault

-Renault

Renault is finally starting to take revenge on its big French rival Stellantis on the stock market. While the diamond firm’s share price is still down 8% over five years to date, compared to an impressive 78% gain for the French-Italian-American car giant (and again, this performance excludes the very high dividends paid out over the period), the phenomenon has clearly reversed itself over the past three months, with Renault shares up 22% but a symmetrical fall (-21%) for the Carlos Tavares-led car.

On the stock market, Renault shares benefited significantly from a combination of strong winds. In the first quarter, the manufacturer’s accounts were better than those of other competitors. And above all the product offensive”starting from the current quarter, which is promising for improving future results», emphasizes Michaël Foundoukidis, analyst at Oddo BHF, in an interview with Capital. Especially since Renault is undoubtedly the only manufacturer that will improve its operating margin this year, according to the expert. Renault also benefited from new sales of Nissan shares (this brings in cash, among other things). The outlook for the credit rating is positive, indicating an improvement in the coming months. “A scenario considered positive for shareholder return (i.e. their reward: better dividend, etc.) beyond the reduction in funding costs“, claims Michaël Foundoukidis.

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Renault and Stellantis: “Shareholders thank you, but the car risks Cubanization”

Renault could be a big winner from the tariffs imposed on Chinese manufacturers

And while the European Commission has just imposed significant tariffs on Chinese exporters of electric vehicles (in the face of Beijing’s dumping strategy, which wants to flood the European Union with low-cost models), Renault is seen as the big winner of this replica. of the old continent because “it will benefit from this in Europe, but will not suffer from possible countermeasures because it will not be exposed to the Chinese market»… Renault also benefited from the finalization of Horse, the thermal engine joint venture set up with Chinese giant Geely, which paves the way for Aramco to participate in a funding round in the coming weeks and months.

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Stellar «fell off the pedestal» and now has to convince the stock market of its ability to bounce back

Unlike usual, Stellantis was visibly disappointed. While the Carlos Tavares-led group has often beaten financial analysts’ expectations in recent years, its first-quarter accounts were “clearly weak, more than expected», notes Oddo BHF. In particular, Stellantis said it expects a below-expected financial performance in the first half, with an operating margin of 10% to 11% below market forecasts. To this is added “many doubts about the high level of Stellantis inventory in the United States and its loss of market share», notes the broker. Stellantis has thus stepped down from its pedestal and its management must now convince equity investors of the manufacturer’s ability to bounce back.

Stellantis: investor day could cause volatility in the stock market, but the stock has strong potential

In this regard, Thursday’s Capital Market Day will be one to watch closely. Stellantis’s comment could then encourage some volatility in the share price in the short term. Aside from the current headwinds, Stellantis shares are currently relatively cheap on the stock market (the manufacturer pays just 4x expected 2024 earnings on a dividend yield of 8%). Royal Bank of Canada, which has an “outperform” rating on the stock, has a target price of €31, representing explosive upside potential, compared to a current price of nearly €20. The Canadian bank, quite confident, hopes for a positive impact of the investor day on the share price.

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Renault is cheap on the stock market

On the other hand, Renault shares appear affordable on the stock market (the manufacturer pays 4 times its annual earnings, like Stellantis), despite their clear overvaluation in recent months. HSBC has just raised its target price on the shares from 57 to 63 euros. While Dacia’s low-cost subsidiary, which benefits from a cost structure of “unique», generates more than a third of Renault’s operating profit, the British bank expects favorable announcements about prices and the launch of electric cars.

Also read:

Renault: can the CAC 40 auto giant make a sustainable stock market recovery?

Momentum readers won on Renault and Stellantis shares. What scenarios now?

In short, Renault shares have a good chance to continue their momentum, while Stellantis shares could gradually reverse the trend and move forward. Since 2021, Renault and Stellantis shares have reported comfortable gains for readers of Momentum, Capital’s premium stock market investment letter. Discover our recent comprehensive analyzes (technical and financial) on Renault and Stellantis at Momentum. And take advantage of the last days of our flash sale for the price of our annual subscription. To take advantage of this, simply click on the link embedded above.

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