On Wednesday, Bernstein provided an overview of the US Autos sector's performance, highlighting a continued growth trajectory in the fourth quarter. The US market has experienced a 10% increase in volumes for October and November 2024, compared to the same period last year, which was impacted by United Auto Workers (UAW) strikes. Average Manufacturer's Suggested Retail Prices (MSRPs) have risen with the introduction of new model years in November.
Ford (NYSE:F) and General Motors (NYSE:NYSE:GM) have capitalized on this growth, with both companies seeing strong tailwinds and stable inventories despite aggressive discounting by competitor Stellantis (LON:0QXR) (NYSE:STLA).
Ford's market performance has been noted, with an increase in its price target to $11.00, suggesting a 10% upside. General Motors' robust US performance has also been recognized, with its price target set at $55.00, indicating an 8% potential upside.
Stellantis, on the other hand, has faced challenges, with November sales down 9% despite an easier comparison to the previous year. Following a guidance downgrade, the company has adjusted US inventories to approach its 300,000-unit target and increased US discounts significantly from 5.3% in July to 9.8% in November.
Despite these challenges, the company maintains strong fundamentals with a P/E ratio of 2.82 and offers an attractive 9.01% dividend yield. Stellantis plans to increase volumes by 20% over the next six months to gain market share. However, its price target has been set at $12.10, reflecting a potential downside of 9%. According to InvestingPro analysis, Stellantis currently appears undervalued, with 12 additional ProTips available for subscribers.
Tesla (NASDAQ:TSLA) has been given an underperform rating with a price target of $120.00. Rivian (NASDAQ:RIVN), which is not covered by Bernstein, is noted to be facing demand headwinds.
Overall, the US Autos sector is showing signs of positive momentum, with increasing discounts, steady production, and stable residual values benefiting original equipment manufacturers (OEMs). However, there are risks associated with significant sticker price increases anticipated for the model year 2025.
Manufacturers are expected to adjust their product mix in anticipation of surpassing a 16 million Seasonally Adjusted Annual Rate (SAAR) in 2025. For deeper insights into the auto sector and comprehensive analysis of over 1,400 stocks, including detailed Fair Value calculations and financial health scores, visit InvestingPro.
In other recent news, Stellantis N.V. (NYSE:STLA) has been navigating substantial shifts in leadership and financial performance. The sudden resignation of CEO Carlos Tavares has led to an interim committee, headed by Chairman John Elkann, temporarily overseeing the company's activities.
Despite the leadership change, Stellantis reaffirmed its financial guidance for fiscal year 2024, which includes an adjusted operating income margin between 5.5% and 7.0%. The company also anticipates industrial free cash flow to range between a negative €5 billion and €10 billion.
Stellantis is also facing potential tariffs proposed by the former U.S. administration, which, according to S&P Global, could cost carmakers up to 17% of their combined annual EBITDA. To improve profitability and market adaptability, Stellantis has outlined a multi-year product transition and announced a collaboration with Infineon Technologies AG (OTC:IFNNY) to enhance power conversion and distribution in electric vehicles.
Analysts have been closely following these developments. HSBC (LON:HSBA) confirmed a Hold rating for Stellantis, while Evercore ISI rated the company "In Line" with a price target of €13.00. Bernstein SocGen Group also reiterated a Market Perform rating.
The Bernstein analysis also highlighted the challenges that European automakers face due to the rapid shift towards electric vehicle technology, with Stellantis being one of the major players impacted.
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