Renault Positives Don’t Stop Stock Market Suffering.
“In terms of earnings power we still believe Renault is the best of the manufacturers”
Renault’s stock price is on the slide, and although that is true of auto shares currently, the French company is being hit harder than most.
Citi Research said this is because of uncertainty created by the French elections, the investigation into its emissions practices and the consolidation of AvtoVAZ of Russia.
Despite performing strongly on the sales front, Renault’s share price has been plunging from a high of €90.74 on Valentine’s Day to around €78 currently.
“We understand why, but the scale of the reaction seems overdone to us. In terms of earnings power we still believe Renault is the best of the manufacturers, with favourable tailwinds from product cycle and emerging markets. We stay buyers,” said Citi Research analyst Michael Tyndall.
Tyndall offers this huge hostage to fortune.
“We don’t see French elections as a concern,” Tyndall said, admittedly in a report published before opinion polls showed the election result as impossible to call with four candidates arguably in a position to win in the second round in early May.
Tyndall quotes Renault-Nissan CEO Carlos Ghosn as saying don’t expect any more consolidation between the Franco-Japanese alliance as long as the French state remains a shareholder in Renault.
“Our baseline view is that Macron wins, which to our minds means a stake sale is unlikely, but it doesn’t preclude tighter integration between Renault and Nissan,” Tyndall said.
Opinion polls in mid-April showed Emmanuel Macron locked in a duel with Front National leader Marine Le Pen at the top of the polls for the first round of voting, according to Britain’s Daily Telegraph. The newspaper described Macron as a centrist.
“Meanwhile, communist candidate Jean-Luc Mélenchon is surging in the polls and has drawn level with (conservative) François Fillon in third place, and within four points of Macron,” the Telegraph said.
The first round takes place April 23. If no candidate wins more than 50 per cent, the top two run off on May 7.
Tyndall said investors are also worried about the diesel issue, but says Renault has denied using a defeat device. The issue hasn’t generated any penalty in Europe for VW, even though it has admitted
to using such a device. The worries about AvtoVAZ are overdone too, and the Russian market has found the depth of the trough and the only way now is up.