UBS downgrades Stellantis on stalled U.S. turnaround

Investing.com -- UBS downgraded Stellantis (NYSE: STLA) to Neutral from Buy in a note on Monday, saying its thesis of a U.S. recovery has failed to play out despite a healthy market backdrop.

Analyst Patrick Hummel said the downgrade reflects "too little progress on US turnaround in a healthy sector environment."

The drop-through from higher volumes has been surprisingly low, elevated dealer stock levels require production cuts or higher incentives in the second half, and customer uptake of new products has lagged previous guidance.

UBS added that growing competitive pressure in Enlarged Europe and the Third Engine regions further weighs on the group's path toward "very ambitious 2028 business plan targets."

The firm cut its Stellantis adjusted operating income forecasts by 12% to 18%, to 3.0 billion euros and a 1.9% margin for 2026, and 4.7 billion euros and a 2.9% margin for 2027.

The revisions account for lower North American drop-through, third-quarter production cuts and higher incentives, and sequentially higher raw materials headwinds in the second half.

UBS stopped short of a double downgrade to Sell because North America remains "the fundamentally strongest region in terms of competitive and regulatory dynamics," and shares could respond positively if Stellantis improves volume drop-through and regains market share with limited price impact.

The firm lowered its price target to 5.8 euros from 9.5 euros. At that level, UBS said, Stellantis would trade at 6 times 2027 earnings, versus Ford and General Motors at 7 times and European mass-market peers at 4 times.

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