Bank of America warns: Stellantis' performance may be weak, now it's too early to "bottom fish"

Bank of America Corp has released a research report, downgrading Stellantis (STLA.US) from "buy" to "neutral" and lowering the target price from $16.5 to $11.75. Following a 40% drop in 2024, Stellantis shares have further declined by 18% in 2025 so far, but Bank of America Corp believes it is still too early to "buy low". Bank of America Corp stated that with the release of some key vehicle models, Stellantis' sales in the US market are expected to recover, but concerns remain about sales in the European market, where the company is at a disadvantage in the electric vehicle sector, facing fierce competition. Additionally, Stellantis lacks catalysts, and its performance in the first and second halves of the year may be weak. Bank of America Corp mentioned that since taking office on June 23, new CEO Antonio Filosa has faced many challenges. In the US market, sales remain weak, with tariffs being imposed on Mexican imports (which account for 40% of Stellantis' US sales) since April, and pricing must be consistent with competitors (General Motors/Ford) to prevent market share decline, but new models will not have a significant impact until the 2026 financial year (earliest in the fourth quarter of 2025). In the European market, Stellantis needs to drive sales of electric vehicles due to CO2 emission regulations, but the release of new models has stalled. Furthermore, Stellantis' performance may be weak, with Bank of America predicting that the adjusted pre-tax profit for the first half of the year will be 2.5 billion, 15% lower than market expectations, and pre-tax profit estimates for the 2025 and 2026 financial years are also below market expectations. It will take some time for Stellantis' performance to improve, with the 2025 financial year being a transitional period. On a positive note, Stellantis' profitability is expected to rebound, and strategic choices should support valuation. Bank of America Corp believes that there is almost no downside risk to Stellantis' stock price, as profitability should see a significant increase in the 2026 financial year, driven by growth in US revenue. Bank of America Corp expects US revenue to increase by 13% year-on-year in the 2026 financial year, leading to a rebound in profitability. This is primarily due to the release of new models for Jeep and RAM, but how the company deals with tariffs remains to be seen. Fully improving key models should enable Stellantis to release optimistic targets for 2030. Most importantly, brand restructuring, or even splitting the group into North American and other operations, is not out of the question. This move should support valuation.