As legacy automotive giant Stellantis (NYSE:STLA) prepares for its upcoming earnings report (February 15, before market open) for the fourth quarter of Fiscal Year 2023, management finds itself in a potentially positive backdrop. With pure-play EV enterprises suffering from various troubles, Stellantis – which has a foot in both the combustion and electric-powered doors – could make a compelling case for itself. I am bullish on the possible relevance shift toward STLA stock.
Bad News for Pure EVs Could be Good News for STLA Stock
Fundamentally, the good news for STLA stock centers on the bad news that pure-play EV enterprises have incurred recently. Prior to the much-discussed sector price war, seemingly everyone assumed the same thing: electric-powered transportation represents the future of mobility. Further, with political forces pushing the narrative, it appeared that the days of the combustion-powered car were numbered.
However, economic considerations dragged down the EV space as consumers wrestled with high inflation and high interest rates. Lately, extreme winter conditions left many EV owners stranded as they learned the hard way about underperformance in the cold. Further, with inventory pileups imposing a worrying eyesore on the automotive industry, automakers began questioning the aggressive pivot toward electrification.
Not too long ago, Stellantis CEO Carlos Tavares recognized the possibility of another headwind: the contentious election cycle in the U.S. To mitigate the risk, Tavares stated that he had prepared plans for two outcomes. If the Democrats win big, then he’s ready to ramp up EV production. On the flip side, if Republicans take over, Stellantis will slow the EV rollout.
Granted, it’s not surprising that Tavares disclosed this strategy. Because the company has significant strengths in the combustion side of the business and considerable potentialities in the electric end, it would be foolish not to hedge. However, this hedging is also what makes STLA stock so compelling.
Let’s look at pure-play EV enterprises like Tesla (NASDAQ:TSLA) and its ilk. These companies simply don’t have the luxury of offering consumers combustion or hybrid vehicles.
Moving ahead to Stellantis’ upcoming Q4 earnings report, analysts estimate that the company will generate earnings per share of $1.81. That’s a lofty target considering that one year ago, Stellantis produced EPS of $1.53.
Still, STLA stock…