Stellantis Stock Drops as JPMorgan Downgrades on Delayed Cost-Cutting Impact

Shares of Stellantis (NYSE: STLA) declined on Thursday after J.P. Morgan downgraded the automaker to Neutral from Overweight and sharply reduced its price target. The bank's analysts cited a significant delay in the expected payoff from cost-cutting measures, which pushed the stock lower in both U.S. and European trading.

The Downgrade in Detail

J.P. Morgan slashed its price target on Stellantis to €6 from €10, a reduction of 40%. The firm's analyst, Jose Asumendi, noted that it will likely take another 14 months before savings from cheaper component sourcing begin to positively affect financials with the launch of new models scheduled for 2027-2028.

Following the report, Stellantis's U.S.-listed shares fell 1.8% in premarket trading, while its Milan-listed shares were down 0.8%, according to Investing.com. The new price target is based on valuations of 0.04 times enterprise value-to-sales and 7 times price-to-earnings.

A Slower Path to Recovery

The downgrade reflects concerns that Stellantis is not moving quickly enough on major restructuring. Asumendi wrote that without significant labor reductions or capacity cuts in Europe and North America, there are "limited chances for STLA to make a rapid return across both regions."

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J.P. Morgan contrasted Stellantis's strategy with rivals like Volkswagen and BMW, which are already in advanced talks with unions to adjust capacity. Stellantis has instead opted to leverage its Chinese partners, Leapmotor and DongFeng, to utilize its European plant capacity. While this avoids large restructuring costs, the bank believes some cuts will ultimately be "unavoidable" amid growing market share gains by Chinese automakers in Europe.

Financial Headwinds and Outlook

Reflecting the more cautious outlook, J.P. Morgan cut its earnings estimates for Stellantis by an average of 30% for fiscal years 2026 through 2028. The bank is forecasting a slow second quarter, with its EBIT estimate coming in 12% below the Bloomberg consensus.

Additional risks flagged by the bank include:

• Further earnings downgrades tied to potential quality-related provisions, particularly in North America.
• Intensifying competition in the key Brazilian market.
• The analyst also suggested Stellantis should consider forgoing a dividend until returns in North America improve, despite forecasting positive free cash flow in fiscal 2027.