Morgan Stanley reiterated their overweight rating on Stellantis (NYSE:STLA) with a 12-month price target of €20.00 amidst escalating UAW strikes that have persisted for over 5 weeks.
The union further escalated strikes on Monday, calling for an additional 6,800 members to strike at Stellantis' largest assembly plant, pausing production of the automaker's RAM 1500 pickup truck. One of the company’s most profitable vehicles. The plant is recognized as the only factory producing the current generation Ram 1500.
Stellantis recorded a 17.5% EBIT margin in North America for the first half of 2023, possibly driven by the substantial profit generated by its RAM products.
Up until now, any industrial disputes against Stellantis have been reasonably controllable, and it's worth mentioning that the company's shares have shown resilience in the recent months, compared to its counterparts, Ford (NYSE:F) and GM.
However, it's important to consider that Stellantis had strategically increased its inventory during the first half of 2023, aiming to shore up its capacity to withstand any potential disruptions in production.
According to the 1H23 results, STLA reported a total inventory of 1,374k units, a significant rise from 882k units in June 2021, approaching more customary levels as stated by the company.
The exact volume of inventory for the lucrative Ram 1500 pick-up remains undisclosed. However, it's worth noting that the company had designated its Warren Truck assembly and Jefferson North factory as 'critical status' during the summer, orchestrating an extensive production push to clear order backlogs. Notably, this effort did not include Sterling Heights.
Beyond the UAW updates, analysts expect more “colour” from the company on this newsflow with the 3Q23 Shipments and Revenues call, scheduled for October 31 at 8:00 am EDT.
Shares of STLA are down 0.66% in early trading Tuesday morning.