A management update crashed shares, creating a compelling buying opportunity. By Al Root

Sometimes, good opportunities in the stock market feel scary. Case in point: Stellantis stock tanked by 24% last Friday after an update from management.

The knee-jerk reaction is to avoid the stock after such a steep selloff. That would be shortsighted. With expectations reset, now is the time to dig in. From this low base, Stellantis stock can rise 50% with little more than basic business execution.

To be sure, management's latest update doesn't exactly inspire confidence. The Chrysler parent's Feb. 6 announcement covered a lot of ground, including one-time charges of 22 billion euros ($25.9 billion) for electric-vehicle asset write-downs and warranty-related items. The company said operating profit for the second half of 2025 would come in below guidance. Oh -- and not only will there will be no dividend in 2026, but the company sold EUR5 billion in convertible debt to shore up its balance sheet.

"I think the most surprising thing was less the provisions and impairments...but the still poor operating performance and inability to generate cash," says Oxcap Analytics analyst Stuart Pearson. That kind of operating performance creates the fear of a value trap -- a stock that is in a perpetual cash-burn cycle characterized by things like, well, dividend cuts and capital raises.

Still, car business fundamentals aren't a mystery, and the company can be profitable if it gets products and distribution right. As bad as Friday's update was, it has certainly reset expectations lower. "Clearly, there was a large element of kitchen-sinking going on," says Pearson. "Hard not to think the new management team weren't strongly motivated to just put everything they possibly could into [the update], though."

The new management is CEO Antonio Filosa, tapped to run the company in May, filling a leadership vacuum following the departure of Carlos Tavares in December 2024. It wasn't long ago that Tavares was the toast of the automotive world. He created a top-five global producer of cars via the combination of Fiat Chrysler and PSA Groupe. Today, Stellantis' brands include Jeep, Ram, Citroën, Peugeot, Maserati, and others.

North America is still the company's largest business, accounting for roughly 40% of total revenue, and Europe is just behind, with South America third at about 10% of sales .

Things started out spectacularly for the combined company. Stellantis produced annual operating profits of about $25 billion in both 2022 and 2023, while operating profit margins approached 13%. General Motors' profit margins were closer to 8% at the time.

Under the hood, however, there was engine trouble. Dealers were frustrated with product decisions and high inventory, which culminated in a collapse in profits. Stellantis reported an operating profit of less than $10 billion in 2024, and profits all but evaporated in 2025.

Filosa's job is to turn the company around. His strategy began to take shape late last year, when he announced a $13 billion investment in the U.S. and five new vehicles. Investing in new products takes Stellantis back to Chrysler's roots under CEO Lee Iacocca. "In the car business, product comes first," Iacocca said in the early 1980s. "Product is what brought [Chrysler] back to prosperity."

Things were looking better, with shares stable under Filosa, until the write-downs and dividend cut. It's hard to accept that the stock could be a buy after a cut, but that is a tested, winning strategy, according to Wolfe Research strategist Chris Senyek. "Dividend cuts lead to stock price outperformance over the subsequent one to two years," he says.

Essentially, things can't get much worse. That dynamic led Wolfe Research analyst Emmanuel Rosner to upgrade Stellantis shares after last week's announcement. "Looking ahead, the bar has now been reset lower, and some sequential improvement in earnings and free cash flow is likely in 2026 and 2027, benefiting from new product that should help U.S. market share and provide operating leverage," he wrote.

Rosner upgraded shares only to Peer Perform from Underperform, though. Pearson rates shares Overweight. His price target is $10.70 a share, up 40% from Wednesday's close of $7.62.

It's easy to see a path to $10.70 or higher. Stellantis stock is as cheap as it has been at any point since the pandemic. Profitability is depressed, but shares trade for about 0.15 times sales. Ford Motor and GM, the other two legs of the original Detroit Big Three auto makers, trade at about 0.3 and 0.4 times, respectively.

Stellantis stock typically trades at 85% of the price-to-sales ratio of Ford and GM. Now it trades at 44%, the lowest ratio in the past five years. Getting back even halfway to the historical 85% ratio would mean a $14 stock price, up almost 100% from recent levels.

No one expects that to happen overnight, but that's how low the bar is right now. What could help? An encouraging performance when full 2025 earnings are reported on Feb. 26, when first-quarter results are released in April, or at the company's investor day in May.

There are risks, of course. Consumer spending is always one for auto makers. Americans bought some 16.7 million cars in 2025, the best year since 2019. Europeans bought 13.3 million cars, up about 3% year over year. S&P Global sees U.S. and European volumes stable in 2026. Stable is good enough in the cyclical car business.

The biggest challenge to improving profitability might be China. Its auto makers are coming to Europe. BYD, for instance, is the largest maker of all-battery electric vehicles on the planet, topping Tesla for that title for the first time in 2025. BYD sold some 188,000 cars in Europe in 2025, up 269% year over year. Its share of the entire European market went from 0.4% to 1.4%. It won't stop there.

Still, Stellantis' North American operations, which historically have accounted for a majority of the company's profits, are insulated from Chinese competition for now.

There's time for Stellantis to get it right. Now, management needs to execute.

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A management update crashed shares, creating a compelling buying opportunity. By Al Root

Sometimes, good opportunities in the stock market feel scary. Case in point: Stellantis stock tanked by 24% last Friday after an update from management.

The knee-jerk reaction is to avoid the stock after such a steep selloff. That would be shortsighted. With expectations reset, now is the time to dig in. From this low base, Stellantis stock can rise 50% with little more than basic business execution.

To be sure, management's latest update doesn't exactly inspire confidence. The Chrysler parent's Feb. 6 announcement covered a lot of ground, including one-time charges of 22 billion euros ($25.9 billion) for electric-vehicle asset write-downs and warranty-related items. The company said operating profit for the second half of 2025 would come in below guidance. Oh -- and not only will there will be no dividend in 2026, but the company sold EUR5 billion in convertible debt to shore up its balance sheet.

"I think the most surprising thing was less the provisions and impairments...but the still poor operating performance and inability to generate cash," says Oxcap Analytics analyst Stuart Pearson. That kind of operating performance creates the fear of a value trap -- a stock that is in a perpetual cash-burn cycle characterized by things like, well, dividend cuts and capital raises.

Still, car business fundamentals aren't a mystery, and the company can be profitable if it gets products and distribution right. As bad as Friday's update was, it has certainly reset expectations lower. "Clearly, there was a large element of kitchen-sinking going on," says Pearson. "Hard not to think the new management team weren't strongly motivated to just put everything they possibly could into [the update], though."

The new management is CEO Antonio Filosa, tapped to run the company in May, filling a leadership vacuum following the departure of Carlos Tavares in December 2024. It wasn't long ago that Tavares was the toast of the automotive world. He created a top-five global producer of cars via the combination of Fiat Chrysler and PSA Groupe. Today, Stellantis' brands include Jeep, Ram, Citroën, Peugeot, Maserati, and others.

North America is still the company's largest business, accounting for roughly 40% of total revenue, and Europe is just behind, with South America third at about 10% of sales .

Things started out spectacularly for the combined company. Stellantis produced annual operating profits of about $25 billion in both 2022 and 2023, while operating profit margins approached 13%. General Motors' profit margins were closer to 8% at the time.

Under the hood, however, there was engine trouble. Dealers were frustrated with product decisions and high inventory, which culminated in a collapse in profits. Stellantis reported an operating profit of less than $10 billion in 2024, and profits all but evaporated in 2025.

Filosa's job is to turn the company around. His strategy began to take shape late last year, when he announced a $13 billion investment in the U.S. and five new vehicles. Investing in new products takes Stellantis back to Chrysler's roots under CEO Lee Iacocca. "In the car business, product comes first," Iacocca said in the early 1980s. "Product is what brought [Chrysler] back to prosperity."

Things were looking better, with shares stable under Filosa, until the write-downs and dividend cut. It's hard to accept that the stock could be a buy after a cut, but that is a tested, winning strategy, according to Wolfe Research strategist Chris Senyek. "Dividend cuts lead to stock price outperformance over the subsequent one to two years," he says.

Essentially, things can't get much worse. That dynamic led Wolfe Research analyst Emmanuel Rosner to upgrade Stellantis shares after last week's announcement. "Looking ahead, the bar has now been reset lower, and some sequential improvement in earnings and free cash flow is likely in 2026 and 2027, benefiting from new product that should help U.S. market share and provide operating leverage," he wrote.

Rosner upgraded shares only to Peer Perform from Underperform, though. Pearson rates shares Overweight. His price target is $10.70 a share, up 40% from Wednesday's close of $7.62.

It's easy to see a path to $10.70 or higher. Stellantis stock is as cheap as it has been at any point since the pandemic. Profitability is depressed, but shares trade for about 0.15 times sales. Ford Motor and GM, the other two legs of the original Detroit Big Three auto makers, trade at about 0.3 and 0.4 times, respectively.

Stellantis stock typically trades at 85% of the price-to-sales ratio of Ford and GM. Now it trades at 44%, the lowest ratio in the past five years. Getting back even halfway to the historical 85% ratio would mean a $14 stock price, up almost 100% from recent levels.

No one expects that to happen overnight, but that's how low the bar is right now. What could help? An encouraging performance when full 2025 earnings are reported on Feb. 26, when first-quarter results are released in April, or at the company's investor day in May.

There are risks, of course. Consumer spending is always one for auto makers. Americans bought some 16.7 million cars in 2025, the best year since 2019. Europeans bought 13.3 million cars, up about 3% year over year. S&P Global sees U.S. and European volumes stable in 2026. Stable is good enough in the cyclical car business.

The biggest challenge to improving profitability might be China. Its auto makers are coming to Europe. BYD, for instance, is the largest maker of all-battery electric vehicles on the planet, topping Tesla for that title for the first time in 2025. BYD sold some 188,000 cars in Europe in 2025, up 269% year over year. Its share of the entire European market went from 0.4% to 1.4%. It won't stop there.

Still, Stellantis' North American operations, which historically have accounted for a majority of the company's profits, are insulated from Chinese competition for now.

There's time for Stellantis to get it right. Now, management needs to execute.

   -- Stay tuned for the next live Q&A! Watch the Barron's Investor Circle page 
      for the sign-up link 
 
   -- Share your questions and thoughts in the "Conversation" section below to 
      engage directly with the author and our community 
 
   -- Receive alerts about more content from this author by clicking "Follow" 
      next to the author byline at top 

To subscribe to Barron's, visit http://www.barrons.com/subscribe

(END) Dow Jones Newswires

February 13, 2026 21:30 ET (02:30 GMT)

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