Stellantis Stock Reaches 2-Year Low Amid Dividend Concerns and Barclays Downgrade

Shares in automaker Stellantis experienced a decline on Thursday following comments from CEO Carlos Tavares, who reaffirmed that the company’s dividend and share buyback program would remain unchanged for 2024. However, he did not rule out potential modifications for 2025, raising concerns among investors regarding the automaker’s financial challenges and their impact on future distributions.

In premarket trading in the US, Stellantis shares fell over 3%, while European shares dropped by 3.6%, reaching their lowest point since July 2022. This downturn was exacerbated by a recent profit warning that heightened worries about the sustainability of the company’s dividend and buyback plans.

Tavares, during a visit to a factory in southern France, stated, “Our commitments were made for 2024 and they will be kept. The time for 2025 has not come; we will see what will happen at the end of 2024 for a discussion and a decision for 2025,” addressing questions regarding the company’s dividend policy.

Stellantis, which owns well-known car brands such as Chrysler, Jeep, Fiat, Citroen, and Peugeot, has seen its stock prices plummet over 43% this year, making it the worst performer among European car manufacturers.

Kevin Thozet from Carmignac’s investment committee remarked that European automakers are “falling like autumn leaves,” highlighting Stellantis’ profit warning as an indication of a potentially “zero operating margin in the second half of this year.”

“This is a significant setback for the investment outlook, as it jeopardizes the generous dividend and likely signals the end of buybacks,” Thozet commented.

In related news, analysts at Barclays downgraded Stellantis’ stock rating from Overweight to Equal Weight and reduced their EBIT estimates for 2024-2026 by 33-45%. They cited substantial cuts in free cash flow that raise doubts about the company’s ability to sustain its dividend and buyback programs.

“We underestimated the impact of the US inventory issues and the declining market shares in both the EU and US,” the analysts acknowledged.

“With recovery not expected until at least the first half of 2025, we are downgrading to Equal Weight – but we still see free cash flow as a point of support,” they added.

Barclays has also lowered its price target for Stellantis shares from €23 to €12.5.