Amid a solid performance on Wall Street as the 10-year yield fell back below 4%, the bulls took the opportunity to push global automaker Stellantis (NYSE:STLA) above the major indices. Buoyed by an analyst upgrade, STLA stock popped over 2% on Friday, above the 1.4% return of the S&P 500. While Stellantis’ all-in push toward mobility electrification bodes well for business growth, consumer challenges remain an ongoing obstacle.
Specifically, RBC Capital analyst Tom Narayan upgraded STLA stock to a “buy,” following the underling financial institution’s sit down with Stellantis CFO Richard Palmer, according to Seeking Alpha. The expert placed a price target of $20.16 on the shares. At time of writing, this forecast represents over 7% upside.
Notably, Narayan isn’t alone regarding bullishness toward the automaker. Berenberg Bank’s Romain Gourvil also reiterated a “buy” rating. Further, the analyst sees STLA stock hitting $22.28, representing roughly 19% upside potential.
As well, in recent days, several other institutions reiterated their bullish assessment of the automaker. For instance, both Deutsche Bank and Goldman Sachs reaffirmed their “buy” ratings on STLA stock. About the only difference is the magnitude of optimism. Goldman’s George Galliers anticipates about 7.5% upside for STLA while Deutsche’s Tim Rokossa expects a near doubling in value.
Opportunities and Risks for STLA Stock
Interestingly, no analyst over the past 10 months has issued a sell rating on STLA stock. Further, the charts justify the strong showing of support on the Street. For instance, since the January opener, STLA gained nearly 29%. And in the trailing year, it’s up 14%.
Much of the enthusiasm centers on Stellantis’ strong efforts to drive the electrification of mobility. A few days ago, Reuters reported that the company will invest a total of $155 million in three plants located in Kokomo, Indiana. The initiative focuses on the production of new electric drive modules (EDMs) that will fit electric vehicles (EVs) that Stellantis will assemble in North America.
Following a retooling of the facilities, management expects production to start in the third quarter of 2024. “With the investment, more than 265 jobs will be retained across all three plants,” Stellantis stated.
Notably, the automaker “aims to have battery electric vehicles (BEV) account for 50% of its sales in the U.S. by 2030. It has plans for more than 25 BEV launches in the country by then.” Naturally, this effort bolsters sentiment for STLA stock. It also carries not-insignificant risks.
Primarily, consumer sentiment — though improved from the lows of last year — remain deflated compared to historical norms. In addition, the Federal Reserve’s monetary policy strategy may yield either inflationary or deflationary pressures. Under the former, higher prices will hurt already-struggling households. For the latter, a slowing economy translates to mass layoffs, an obvious headwind.
Why It Matters
Overall, STLA enjoys a consensus strong buy rating across 12 analysts covering the enterprise in the past three months. The worst ratings are two holds. On average, their price target stands at $22.07, implying over 17% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
