Stellantis Takes Hit Amid Dividend Doubts

Global automaker Stellantis' stock price (NYSE: STLA) has been coming under fire, with losses of 19.31% over the last week bringing new 52 week lows. The owner of prominent brands such as Chrysler, Jeep, Fiat, Citroen, and Peugeot, has seen markets concerned over future dividends and a stock downgrade by Barclays also not helping sentiment any.

CEO Carlos Tavares affirmed the company's commitment to preserving its dividend and share buyback program throughout 2024, albeit hinting at the possibility of modifications come 2025. This cautious stance comes amidst a challenging period for the company, evidenced by a more than 43% year-to-date plunge in its stock value. Stellantis now stands as the most affected European carmaker in the stock market this year.

Contributing to the downward trend, analysts at Barclays have moved to downgrade Stellantis's stock from ‘Overweight' to ‘Equal Weight.' The decision arises from significant reductions—ranging from 33-45%—in their estimates for Stellantis's 2024-26 Earnings Before Interest and Taxes (EBIT). These reassessments reflect a sobering review of the company's free cash flow and raise doubts regarding the sustainability of Stellantis's dividends and share buybacks.

Further exacerbating concerns, Barclays has adjusted its price target for Stellantis's shares, cutting it almost by half, from €23 down to €12.5. This revision lays bare the concerns about the automaker's recovery prospects, which may not materialize until at least the first half of 2025, according to Barclays's projections.

As Stellantis navigates these troubled waters, there's heightened scrutiny on its steps forward, particularly regarding how it will balance shareholder returns with financial sustainability. With the automotive industry facing various challenges, including supply chain disruptions and shifting market demands, Stellantis's resilience and strategic agility will be put to the test as stakeholders and market watchers closely monitor its maneuvering through the remainder of the fiscal year and beyond. As Stellantis' stock has already lost 43.25% on a YTD basis, the trend is firmly bearish, and a shift in sentiment may take a significant catalyst.