RNSDF - RBC upgrades Stellantis to Buy after meeting with management

Stellantis ( NYSE: STLA ) shares rose in premarket trading on Friday after RBC Capital markets moved to a Buy rating after sitting down with the CFO.

“We hosted Stellantis' CFO Richard Palmer in investor meetings in Canada and came away more bullish on the story,” equity analyst Tom Narayan said. “The company is now our favorite mass-market OEM.”

He said that the European automaker’s looks poised to dominate the European market as both Ford ( F ) and GM ( GM ) appear challenged on the continent, according to RBC’s analysis. Crucially, the group is achieving strong profitability in Europe while many key competitors continue to struggle. The group also has fewer “corporate government obstacles” as compared to German and French giants Volkswagen ( OTCPK:VWAGY ) and Renault ( OTCPK:RNSDF ).

Additionally, the potential IPO of the Maserati brand could be a boost to the auto group.

To be sure, Narayan acknowledged that the company is behind in terms of EVs. Additionally, significant exposure to the European market could hamper performance as pricing is more likely to falter on the continent than it is in North America. Competition from Tesla as it seeks to produce lower cost vehicles and a lack of exposure to China were cited as “pushback” against the bull thesis.

That said, the lack of exposure could end up being a positive for Stellantis, according to Narayan.

“The Chinese BEV market is getting more competitive especially with domestic players like BYD gaining market share,” he told clients. “Stellantis not being in China is a big advantage.”

He upgraded the stock from Market Perform to Outperform and assigned a €19 price target to the stock. European listed shares of the automaker rose 2.63% on Friday.

Read more on the company’s planned investments in US-based auto production .

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