Greetings everyone!
Stellantis was mentioned in the latest Verner’s Quarter (Vernerin vartti), and there wasn’t a thread for it yet. The company is the largest by market capitalization among companies listed on the Italian stock exchange. The name Stellantis might not mean much to many, but the brands of this car manufacturer are certainly familiar to everyone:
Stellantis is a relatively new entity, and its shares have been traded since January 2021. The company was formed by the merger of two automotive giants: Fiat-Chrysler and PSA joined forces. I won’t go into more detail about this merger; those interested can read the most important facts from the Wikipedia article: Stellantis - Wikipedia.
I have been a Stellantis owner since the summer of 2022 and started following this entity immediately after the companies merged. I didn’t become an owner immediately because I wanted to see how the dust settled after the merger: how the giants’ finances would consolidate and what the company’s goals and strategy would be. Once things became clear and the price was exceptionally cheap in light of the financial figures, I invested. It’s clear that the company’s brands are by no means among the most glamorous in everyone’s eyes. I have personal experience with both Fiat and PSA products through my childhood home, but I am not a true fan of the brands.
The first factor that caught my attention is the company’s strategy. Before 2015, products from both Fiat-Chrysler and PSA, with a few exceptions, didn’t evoke any particularly strong emotions. However, while following automotive media regarding both company entities, my attention was drawn to one aspect: the quality of the products had improved, and this manifested as increased reliability. In my opinion, this was an excellent sign.
Before the merger, the most serious shortcoming associated with the brands was already improving. When Stellantis’ actual strategy for its various brands was presented, I thought it was quite fitting for the current uncertain automotive market. Firstly, all Stellantis car brands have streamlined their model ranges, and the least profitable models have been discontinued. This is particularly evident in Fiat’s product portfolio, of which not much is left. The portfolio is now being rebuilt for each brand. Secondly, I believe Stellantis is successfully pursuing a dual strategy regarding electrification. Stellantis certainly has a clear strategy for electrifying its model range. However, before electrification truly takes off, there is also demand for other powertrain options. For several models, Stellantis has extended their lifecycle and squeezed out the last buying desires with all sorts of special editions. The Dodge Challenger sold across the pond is an excellent example of this. At the same time, the group’s common platform architecture has been developed, and models built on it will soon enter the market. It is also interesting that Stellantis has first brought a model to market as a fully electric vehicle, but because there is demand for internal combustion engines, such a version of the model has then been developed. An example of this is the Fiat 500. You can read about this, for example, in a recent article from Helsingin Sanomat (Hesari) (Ajoimme Vantaalla autoa, joka tulee olemaan pohjana miljoonille tuleville sähköautoille | HS.fi). Thirdly, in my opinion, a good design direction has been found across all the group’s cars. This is, of course, a matter of taste, but I believe each car brand has beautifully found its own line and/or a modern interpretation of its historical “family look.” All in all, I consider Stellantis’ new models to be good-looking cars. Fourthly, I see Stellantis’ limited presence in the Chinese market as a positive aspect. Thus, the so-called “China risk” is not present for this car manufacturer in the same way as for many other manufacturers. On the other hand, this could also be seen as a lost opportunity, but I personally think that focusing on Europe and the United States is not necessarily a bad thing.
The Italian-American-French merger has quite deservedly raised pessimistic initial assumptions. Upon merging, Stellantis set various goals, the entirety of which is known as “Dare Forward 2030.” One of the primary goals was to generate savings in the near future through the merger. The target was set at five billion, but the recently published financial statements state that savings worth eight billion have been realized. Optimization at Stellantis continues, as evidenced by this Kauppalehti article: Sähköistämisen satoa –Autojätti irtisanoo 2 500 työntekijää | Kauppalehti. In general, the interim targets set have either been met or significantly exceeded. For example, the cash flow target was set at six billion, and last year’s realization was 12.9 billion. The most important goals are shown on the company’s website Dare Forward 2030 - A Bold Strategic Plan | Stellantis and in this image:
Financially, Stellantis has thus been a positive surprise. When I invested, I didn’t believe things could go this well; rather, I imagined that the targets might not be met. Even if the targets had been somewhat missed, I still considered the purchase price to have been quite affordable. In the summer of 2022, Stellantis’ valuation multiple was quite low. It still is, of course, as the P/E is below 5 and the dividend yield is over 6%. The company is net debt-free and has a net cash position of 29.5 billion euros. This is quite massive when compared to the company’s market capitalization, which is only 84 billion euros.
The company’s share price has been on a rather sharp rise recently, and analyst expectations are shown in the following Marketscreener chart:
