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Stellantis Plans An Epic 2025 Comeback. Is The Stock A Buy?
Everyone loves a good comeback story; it's the stuff legends are born from. The stage is set for Stellantis (NYSE: STLA) to attempt a massive comeback after shedding roughly half its value since March 2024, and if executed, it could reward risk-accepting investors. The automaker, which owns brands such as Ram, Jeep, Alfa Romeo, among many others, trades at a rock bottom price-to-earnings ratio, has doom and gloom surrounding potential tariff impacts, and has a rocky relationship to repair with its network of dealerships.
Let's take a look at what Stellantis has on its plate right now, and what it must to do complete an epic comeback.
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Change of plans
Here's what Jeff Kommor, Senior Vice President of Commercial Sales for Stellantis North America, told Automotive News:
Keep an eye on us all year long. You're going to see incremental improvements, you're going see momentum, you're going to see sales gains. The dealers got our back, we got their back, and I feel like we're starting to gain their trust and optimism back. 2024 was just not where any of us needed to be.
Indeed, Stellantis has a lot of plans for 2025. The company plans to explore powertrain opportunities, reenter segments that it had previously exited, put its product in a more competitive position, and focus on improving vehicle quality. Along with that will be an advertising push to make sure the company is driving demand.
Further putting its money where its mouth is, and in an attempt to build ties with President Donald Trump, Stellantis is also planning to invest more than $5 billion in the U.S. to strengthen its manufacturing footprint. Stellantis is investing $1.2 billion into its Belvidere, Illionois, assembly plant that would be used to build a new midsize pick-up truck, as well as investing in its Detroit plant that will make a new Dodge car. It's also investing in its Toledo site that produces Jeep trucks, among other investments.
Another goal Stellantis met recently to help fuel its comeback was cutting its U.S. inventory by more than 100,000 vehicles late last year. Cutting its bloated inventories helps relieve pressure on dealerships needing to offer huge discounts and other profit-eroding incentives.
But before investors can dream of all those plans driving an epic comeback, they also have to consider the uncertainty facing Stellantis.
Should investors buy in?
One of the biggest potential problems facing global automaker Stellantis is Trump's threat of additional tariffs on Canada and Mexico. More specifically, Trump has threatened to impose a 25% tariff on U.S. imports from the two countries, which is a huge deal considering about 40% of Stellantis' vehicles sold in the U.S. are manufactured in Canada and Mexico, per Moody's.
In fact, according to S&P Global in a report, European and American automakers could stand to lose up to 17% of their combined annual core profits if the U.S. imposes tariffs on Europe, Mexico, and Canada, with Stellantis marked as one of the most exposed to tariff problems.
It's also fair to note that all the doom and gloom seems priced in, as you can see Stellantis trailing its competition in valuation significantly.
STLA PE Ratio data by YCharts
As a bonus on top of Stellantis' cheap valuation, its dividend yield is up to 12.4%, although investors have to note that Stellantis doesn't pay a fixed dividend and rather pays 25-30% of net profit, which likely means a declining yield as the company works through its near-term issues. . Ultimately, despite the massive potential upside, this is a comeback that will likely take longer than 2025 alone; it's a big turnaround process and Stellantis has a lot of problems to fix and uncertainty to face in the near term. For investors, this might be a comeback to watch from the sidelines, rather than a stock to buy now.
Should you invest $1,000 in Stellantis right now?
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Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Moody's. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.
