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Investing.com -- Jefferies has reiterated its bullish view on Stellantis (BIT:STLAM) (NYSE:STLA) shares following a wave of investor engagement sparked by last month’s upgrade.
The broker sees the stock as “a rare cyclical and asymmetric investment case,” with substantial upside linked to internal improvements and a recovery in North America.
Analysts led by Philippe Houchois note “significantly more interaction than we had anticipated” after the upgrade, with most investors aligned on the idea of an inflection point and asymmetric upside.
While there was some debate around timing and execution, they saw no major pushback to its core thesis.
North America remains central to the story. The company’s RAM brand, which contributes roughly half of the region’s normalized earnings, is seen as the main driver of near-term momentum. Jefferies pointed to inventory normalization, stabilizing retail share, and new models reaching showrooms as key catalysts.
Further support is expected from the relaunch of the Jeep Cherokee and ramp-up of the Dodge Charger.
Investor concerns around U.S. consumer strength and tariffs were noted, especially the risk that building the Cherokee in Mexico could increase headwinds.
The analysts said the challenges in North America are seen as “largely self-inflicted,” tied to earlier strategies focused on CO2 compliance through product cuts and pricing, which accelerated share losses.
Still, the recent passage of OBBB “creates a more favourable environment for domestic producers,” they added, easing pressure from CO2 fines and improving tax treatment.
The situation in Europe is more complex. Jefferies flagged ongoing challenges, including regulatory uncertainty, competition from Chinese automakers, and brand repositioning efforts.
“Fixing Europe is not completely under STLA’s control,” the analysts wrote, pointing to shifting CO2 rules and evolving requirements on China vehicle imports.
Investors commended CEO Carlos Tavares for recognizing early the threat from Chinese cost competitiveness and partnering with Leapmotor (HK:9863), though the value of that relationship remains unclear to investors.
Questions persist around brand strategy and the timeline for restoring visibility on earnings and free cash flow.
While margin pressure is expected in the Middle East and Africa, the broker is more confident in the resilience of Latin America, especially Brazil, supported by “historic strengths” in local production and flexible fuel technology.
Looking to first-half results due July 29, investor expectations vary widely. Jefferies forecasts adjusted EBIT of €2.2 billion, including €850 million from capitalized R&D, with North America contributing around €200 million.
However, some estimates suggest over €1 billion in losses in that region alone. The firm acknowledged “solid pushback” on its €2.2 billion EBIT improvement estimate for 2026.
Despite uncertainties, valuation remains compelling. The stock trades around 4x Jefferies’ unrecovered 2026 earnings estimate.
While some investors view past share price peaks as anomalous, Jefferies sees a “rare cyclical opportunity” supported by self-help levers and a potential rebound in U.S. operations.