Stellantis rating cut as analyst sees ’considerable downside risk to earnings’

Investing.com -- Wolfe Research downgraded Stellantis (NYSE:STLA) to Underperform in a note Wednesday, citing structural challenges and macroeconomic headwinds that could weigh on earnings and free cash flow in the coming quarters.

“We downgrade STLA to UP from PP with EUR 6 price target, as we see considerable downside risk to earnings and FCF estimates amid deep structural issues,” Wolfe analysts wrote in their updated Autos Playbook for the second half of 2025.

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The firm noted that while the U.S. administration has introduced some tariff relief after initially announcing 25% tariffs on imported vehicles and many non-USMCA parts, the benefit has been uneven across the auto sector.

“Supplier stocks, all of whom appear to be passing along tariff costs, have largely recovered,” the note said. However, “GM & STLA (that have a higher net tariff burden) still lagged.”

Wolfe warned that despite optimism around further tariff reductions, “some tariffs will likely remain,” and broader macro uncertainty, alongside already elevated valuations, makes it “hard to have conviction on autos cyclical names.”

In contrast, the analysts suggested investors focus on “quality suppliers with reliable growth above market, margin upside from own cost actions, strong FCF, and clear valuation upside.”

While General Motors (NYSE:GM) and Ford were both maintained at Peer Perform, Wolfe said it relatively favors GM due to its strong free cash flow generation and potential larger relief from tariffs, but noted Ford may have an “easier Q2 setup.”

The firm also reiterated concerns about Tesla (NASDAQ:TSLA), warning of a potential “air pocket” in the coming weeks unless the company makes meaningful progress on its autonomous vehicle technology.

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