Stellantis stock hits a 2-year low on dividend concerns, Barclays downgrade

Investing.com -- Shares in automaker Stellantis (NYSE:STLA) fell Thursday after the company’s CEO Carlos Tavares reaffirmed that the company's dividend and share buyback program will remain intact for 2024. However, he did not dismiss the possibility of adjustments in 2025, as investors grow concerned that the automaker's financial difficulties could affect future distributions.

Stellantis saw its shares fall more than 3% in US premarket trading, while its European shares dropped 3.6% to the lowest level since July 2022. This happened after a recent profit warning fueled worries about the sustainability of its dividend and buyback plans.

"Our commitments were made for 2024 and they will be kept. The time for 2025 has not come, we will see what will happen at the end of 2024 for a discussion and a decision for 2025," Tavares stated during a factory visit in southern France, addressing the company's dividend policy.

Stellantis owns popular car brands like Chrysler, Jeep, Fiat, Citroen, and Peugeot (OTC:PUGOY). Its stock has plunged more than 43% this year, making it the worst performer among European carmakers.

Kevin Thozet, from the investment committee at Carmignac, commented that European automakers are "falling like autumn leaves," with Stellantis' profit warning indicating "a zero operating margin in the second half of this year."

"This is a real blow to the investment thesis, as it could put the generous dividend at risk and will very likely imply saying 'bye bye' to buybacks," Thozet added.

Meanwhile, analysts at Barclays (LON:BARC) downgraded the Stellantis stock from Overweight (OW) to Equal Weight (EW) and cut its 2024-26 EBIT estimates by 33-45%, citing significant cuts in free cash flow (FCF) that cast doubt on the automaker's ability to maintain its dividend and buyback initiatives.

“We got wrong-footed on STLA, being too slow to acknowledge its US inventory issue and eroding EU/US market shares,” analysts noted.

“Without real proof points for recovery until H1-25 at the earliest we downgrade to EW (from OW) - but view FCF as support.”

Barclays also reduced the price target on Stellantis’s shares to €12.5 from €23.