Hand on heart, have you ever heard of Stellantis? Anyone who doesn't happen to be closely associated with the automotive industry is likely to answer "no" to this question. Yet behind the name, which comes from Latin and translates to "studded with stars," are two well-known global corporations: PSA and Fiat Chrysler (FCA). The two automakers merged earlier this year to form Stellantis.
The merger, announced back in 2020, is shaking up the industry in a big way. Together, the duo has not only risen to become the world's fourth-largest car company behind VW, Toyota, and the alliance of Renault, Nissan, and Mitsubishi, the twosome also complement each other perfectly regionally. While PSA is one of the leading brands in Europe, FCA has a strong overseas presence. The alliance is led by former PSA boss Carlos Tavares, who has already done a good job of cleaning up the French company. In just a few years, he has turned around the Peugeot and Citroën brands and restored the group's profitability.
Tavares has high hopes for the merger. The 62-year-old top manager expects annual savings of more than EUR 5 billion. In particular, costs are to be saved by merging platforms, engines and transmissions, as well as by joint purchasing. In terms of electrification, the Group also wants to shift up a gear. In 2021 alone, eleven new electric vehicles are to be launched and the product range is to be expanded to a total of 39 hybrids and electric models. "We are going full throttle on battery electric cars because we believe that the sales mix of electrified vehicles will move very quickly in the direction of pure battery electric vehicles," Tavares says, explaining his strategy. It's a long overdue move, given that analysts have often complained in the past that both PSA and FCA are lagging behind the competition in the disruptive future technologies of "electromobility" and "autonomous driving."
By 2025, the company aims to have electrified all of its cars offered in Europe, as well as its light commercial vehicles. To achieve the highest possible quality with good cost control, Stellantis also plans to produce other components in-house. This applies to e-car batteries, for example. Together with Total and its subsidiary Saft, the group is currently investing billions in setting up a European battery production facility. The battery factory in Douvrin, France, is scheduled to start production in 2023, followed by another in Germany in 2025.
The necessary supply of rechargeable batteries is crucial in order to be able to compete. Already this year, Stellantis is pushing the pace on sales of electric vehicles. According to investment holding company Exor, which owns 14.4% of the newly created car company, sales of partially and fully electric vehicles are expected to nearly triple to 400,000. Group-wide, the signs are also pointing to growth again in 2021. The company's management expects higher figures after a full stop last year, when sales slumped by more than a fifth. Sales in China are expected to rise by 5%, in North America by 8% and in Europe by as much as a tenth. Stellantis is also setting higher targets for profitability. Operating margin is expected to be in a range of 5.5% and 7.5%, up from 5.3% in 2020.
The analyst consensus is that Stellantis, which has a total of 14 brands under its umbrella, will be able to iron out the Corona dip in the coming years. After a decent rebound in earnings per share (EPS) from EUR 0.37 in 2020 to EUR 2.22 in 2021, EPS is expected to continue to grow at a double-digit percentage rate. According to Thomson Reuters, EPS is expected to rise 22% in 2022 and 17.5% a year later. Given these growth prospects, a price-to-earnings ratio in the 5 range does not seem ambitious.
The stock market crowd seems to think so, too: Stellantis shares have risen by around a tenth in the past 3 months. However, the stock is no longer making any headway at the current level. The share price has been fluctuating around the EUR 14 mark since December 2020. Support in this area is provided by the 100-day moving average line, which runs around EUR 1 below. The horizontal barrier at EUR 15, on the other hand, is currently blocking any major upward breakouts. With the new Softcallable Barrier Reverse Convertibles, however, a breakout is not necessary. The products can generate a respectable return even if prices continue to stagnate or even fall moderately: The Swiss franc version offers the prospect of a maximum return of 8.60% p.a.; in EUR, even 9.00% p.a. is possible. The risk buffer of 35% in each case protects the investment on the downside.
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