Electric vehicle charging companies in Europe and the U.S. have started fighting over the best spots for fast public chargers, and industry watchers predict fresh rounds of consolidation as more big investors enter the fray.
Although EVs may represent the future of mobility and transportation, the intense competition in the space clouds the investment narrative of alternative providers like Stellantis (
NYSE:STLA
). While the automotive company might be arriving a bit late to the party, it commands brand leverage that could tilt the odds in its favor amid the bitter industry war. I am bullish on STLA stock for its potential ability to pull off a surprise.
Brand Distinction May Play a Massive Role for STLA
According to accounting and consulting firm
Ernst & Young, nearly half of U.S. car buyers intend to purchase an electric-powered car. In addition,
Pew Research Center noted that among consumers considering making the transition, 72% state that helping the environment makes up the core incentive. Therefore, it’s not terribly surprising that EVs tend to look rather boring. That’s where STLA stock might connect with its first big punch.
Stellantis brands, such as Dodge, have never been shy about their brash, Detroit muscle heritage. However, replicating that hubris on the electric canvas seems odd. After all, we’re really talking about completely different kinetic paradigms. Yet, leave it to Dodge to break free from the unimaginative prison that many automakers have subjected themselves to.
Instead, the company will soon introduce its Charger EV, a vehicle that looks almost exactly like a mean muscle car straight out of the
Fast and Furious movie franchise. The only dead giveaway is the lack of exhaust pipes. Fundamentally, Dodge will replicate as much as possible the experience – including artificially generated exhaust notes – of a Detroit-bred, V8-engined rocket ship on wheels.
It’s a risk, given that Dodge will be facing entirely new demographics of younger millennials and Generation Z members. However, if the automaker can tap into possible underlying machismo – along with capturing the attention of sustainability-oriented baby boomers – the Charger would represent a breath of fresh air. In turn, STLA stock could rise higher.
And let’s also not forget that Stellantis has many other brands that it can electrify, including Alfa Romeo, Chrysler, and Jeep.
Stellantis Marches Toward Its Vision
Another factor that could distinguish Stellantis from the
heightened competition in the EV ecosystem is its strategic vision. Specifically, the company operates under a directive that by 2030, half of its U.S. passenger cars and light trucks will be powered by electric motors. To help make this plan economically feasible, the company seeks vertical integration for developing its EV battery packs.
This approach will encompass design, development, testing, and production. Further, the main basis of the overall strategy focuses on delivering superior consumer-centric performance stats. To get the ball rolling, Stellantis has invested in a dual chemistry strategy to cover all customer needs. Through efficient design and assembly of the EV battery packs, the economies of scale may allow the automaker to deliver multiple products under one baseline platform.
To be fair, STLA stock presents risks regarding its bullish narrative, particularly the late entry. While other legacy automakers saw the writing on the wall and began shifting their production lines toward EVs, Stellantis has generally been dragging its feet.
That said, Stellantis notes on its website that it leverages a community of more than 160 nationalities. Further, it operates in more than 30 countries and enjoys customers in more than 130 markets. It’s not as if Stellantis represents a relative unknown.
So, when a brand with which people are already familiar decides to transition to the electric route, that would arguably be a more credible pathway than attempting to convince a consumer to buy a brand from scratch.
Discounted Opportunity Beckons
At the moment, the market prices STLA at a trailing-year earnings multiple of 3.4x. In contrast, the automotive industry runs an average price-earnings ratio of 16.7x. To drive home the point further, Tesla (
NASDAQ:TSLA
) shares run a hot earnings multiple of 78.4x.
In fairness, a low PE ratio doesn’t guarantee anything. However, for STLA stock, the multiple could be deflated due to broader skepticism, such as the late EV sector entry. Nevertheless, that argument also ignores the rich potential of Stellantis being able to electrify its legacy portfolio. Plus, the company daring to be different deserves a second look.
Is STLA Stock a Buy, According to Analysts?
Turning to Wall Street, STLA stock has a Strong Buy consensus rating based on 13 Buys, one Hold, and zero Sell ratings. The
average STLA stock price target is $25.60, implying 13.2% upside potential.
The Takeaway: STLA Stock Could Enliven a Stale Market
Stellantis' brand leverage and vision make it a compelling, undervalued alternative in the crowded EV space. With unique offerings like the Dodge Charger EV catering to younger demographics, its diversified portfolio, and strategic vertical integration plans, STLA stock presents a potential surprise play in the EV market. Trading at a discount compared to the industry average, STLA offers value investors an attractive entry point.
Disclosure
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