Stellantis N.V. (NYSE:STLA) experienced a significant 10% drop in stock value on Tuesday following a first quarter 2024 report that highlighted a decline in sales and shipments compared to the previous year.
This downturn comes at a critical moment as the automaker is preparing to launch a substantial number of new vehicles later this year.
The company, known for its European-focused portfolio and brands like Ram, Jeep, and Fiat, reported a 12% decrease in revenue to $44.54 billion compared to the same period last year. CFO Natalie Knight attributed the decline to various factors including product transitions, inventory management challenges, regional sales mix, and foreign exchange impacts. Shipments fell by 10% globally, totaling 1.335 million units, constrained by low inventories and supply chain issues.
Future Outlook Amidst New Model Launches
Despite the disappointing quarter, Stellantis remains optimistic about the upcoming quarters, expecting new product launches to help boost Q2 shipments and inventory levels.
The company reiterated its full-year 2024 guidance, forecasting a double-digit adjusted operating income, anticipated to be in the low teens. However, this assurance did little to calm investors, with shares tumbling by 10% in midday trading, although they are still up by 3% for the year.
Investors and analysts remain skeptical, particularly about the potential inventory buildup with 25 new models set to launch, which could lead to increased discounting and impact profit margins. Garrett Nelson, an analyst at CFRA, expressed concerns over what he described as “bloated” inventory levels, particularly in Stellantis’s crucial North American market. Following these developments, Nelson downgraded the company’s stock rating to Hold and lowered his price target from $30 to $24.
In efforts to align supply with demand, Nelson suggested that Stellantis might need to enhance incentives further. On a positive note, CFO Knight highlighted that the company managed to stabilize net pricing by lowering manufacturer’s suggested retail prices and incentives.
She also pointed to strong sales performance in plug-in hybrid and electric vehicles, which saw a nearly 80% increase in sales for plug-in hybrids and an 8% increase for full electric vehicles, albeit from a low base.
As Stellantis gears up for the second half of the year, the market is keenly watching whether the introduction of new models, including electric and hybrid versions of its popular Ram pickups, will revitalize the automaker’s fortunes.
Featured Image – Freepik
