We recently compiled a list of the 8 Most Undervalued EV Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Stellantis N.V. (NYSE:STLA) stands against the other undervalued EV stocks.
In 2024, the worldwide EV (electric vehicle) market value was roughly $1.32 trillion, as reported by Grand View Research, and it is expected to expand at a CAGR 32.5% between 2025 and 2030. Worldwide governmental rules and rewards are boosting EV sales. Numerous nations enact strict pollution laws and give rebates, tax cuts, and other benefits to buyers and producers, which pushes a change from gas-powered cars to electric ones. Furthermore, battery tech gains are improving EV range, power, and cost. New ideas like solid-state cells and better lithium-ion cells cut costs and boost energy storage, thus making EVs more attractive.
The EV sector navigated a turbulent 2024 due to macroeconomic pressures. Tradu recently reported that elevated inflation and surging interest rates globally constricted consumer spending, particularly on high-value items like EVs. This economic strain translated into a noticeable deceleration in battery electric vehicle (BEV) sales across key markets, notably Europe and the US. In Europe, BEV registrations experienced a decline, while hybrid vehicle sales surged. This reflected a consumer shift towards more affordable and range-extended options. The US market, while still growing, witnessed a slowdown compared to the previous year’s expansion. China, however, grew, with new energy vehicle (NEV) sales, which included BEVs, plug-in hybrids, and fuel cell vehicles, and surpassed 50% of total sales. This regional disparity underscored the varied pace of EV adoption worldwide.
Entering 2025, the EV industry anticipates a year of transition, marked by both challenges and opportunities. A risk lies in potential policy shifts, particularly in the US, where a change in administration could jeopardize existing EV incentives and regulations. The potential repeal of the federal tax credit, for instance, could impact EV affordability and demand. Furthermore, trade tensions, especially between China and Western nations, pose hurdles to market access. Increased tariffs and import restrictions could disrupt supply chains and limit consumer choice. However, there’s optimism for improved macroeconomic conditions. As inflationary pressures subside and central banks begin to lower interest rates, EV affordability is expected to improve. Moreover, the long-term trajectory towards electrification, driven by emission regulations and industry investments, appears irreversible.
A pivotal factor influencing EV adoption in 2025 will be the introduction of more affordable models. Recognizing the need to expand their customer base, major automakers are developing sub-$30,000 EVs. Chinese manufacturers, using their cost advantages and established supply chains, will play a role in this segment and offer competitive pricing and a wider range of models. The availability of affordable EVs is expected to be a major catalyst for market growth. Additionally, the advancements in autonomous driving technology are anticipated to revive the EV sector. While regulatory hurdles and safety concerns remain, 2025 could witness accelerated deployment of autonomous driving features. This will enhance the overall user experience and expand the potential applications of EVs. The convergence of electrification and autonomy will reshape the automotive landscape and drive innovation.
Our Methodology
We sifted through online rankings and stock screeners to compile a list of the top EV stocks that had a forward P/E ratio under 20. We then selected the 8 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 1000 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up view of a modern automobile with its sleek curves and luxurious body.
Stellantis N.V. (NYSE:STLA)
Forward P/E Ratio as of March 7: 3.82
Number of Hedge Fund Holders: 32
Stellantis N.V. (NYSE:STLA) is a global automotive manufacturer that is expanding its EV presence alongside its traditional offerings. The company designs, engineers, manufactures, and distributes a range of vehicles under brands like Peugeot, Citroën, Fiat, and Jeep.
The company is pushing its EV segment, despite a challenging 2024. It launched 20 new models in 2024, with 10 more planned for 2025, which includes the electric Jeep Wagoneer S. Still, consolidated shipments for the company fell 12% in 2024 to 5.4 million units, and net revenues dropped 17% to EUR157 billion. The company plans to recover from a difficult 2024 through collaboration and market expansion in the EV segment. In China, the Leapmotor International venture is a critical partnership, with Leapmotor doubling its sales to 300,000 units in 2024. In Europe, Stellantis N.V. (NYSE:STLA) is introducing new EVs and mild hybrids in the competitive B segment.
It’s also addressing the growing importance of software in EVs, particularly with AI and autonomous driving features. The company is integrating software and engineering teams to accelerate the development of these technologies. Stellantis N.V. (NYSE:STLA) aims to return to positive industrial free cash flow in 2025, weighted more towards H2 of the year. Inventory reduction, market coverage enhancements, and increased competitiveness are also a focus for 2025.
Earlier in 2024, Ariel Global Fund expressed its bullish sentiment on Stellantis N.V. (NYSE:STLA) and stated the following in its first quarter 2024 investor letter:
“We added multinational automotive manufacturing company, Stellantis N.V. (NYSE:STLA), which was formed from the merger of Fiat Chrysler Automobiles and the French PSA Group in the period. With deal synergies lowering overall operating expenses and contributing to healthy free cash flow generation, management has begun increasing shareholder returns through dividends and share buybacks. Although some investors remain on the sidelines over concerns auto sales and margins have peaked, STLA’s average transaction price is growing year-over-year. We think this momentum will continue and expect STLA to deliver double-digit operating profit margin as it further expands its leading position in the Middle East and South America. Furthermore, the company’s Leapmotor joint venture presents a unique way to benefit from the strengths of Chinese original equipment manufacturers. Meanwhile, in the current electric vehicle slowdown environment, we believe STLA is best positioned to weather the storm. Management believes it can maintain profitability and is open to rationalizing its 14 brands. STLA seeks to be number one in the commercial vehicle segment by 2027, which comes with high customer stickiness, solid profitability and recurring revenue streams.”
Overall STLA ranks 5th on our list of the most undervalued EV stocks to buy according to hedge funds. While we acknowledge the potential of STLA as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than STLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.