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Renault, Via Nisssan, Could Gain From U.S. Recovery

As investors survey the financial rubble around them, it is natural for them to dream of better times.

Renault has been the beneficiary of such musings, with investment bank Morgan Stanley, and stockbroker Bernstein Research focussing on Renault’s recovery prospects, benefitting from a possible spurt in sales in the U.S.

Morgan Stanley analyst Adam Jonas said U.S. president Barack Obama wants a scrappage or recycling scheme and Renault affiliate Nissan would be ideally place to benefit from a spike in sales which could reach an annual rate of 15 million for a few months.

“We expect the U.S. light vehicle market to be the first of the world’s major markets to recover coming out of the recession. Renault is one of the best ways to play this recovery,” Jonas said.

Bernstein Research analyst Max Warburton also sees merit at Renault.

“We are upgrading Renault on its small car exposure, a likely change in Megane pricing strategy, U.S. exposure (Nissan) and greater risk appetite,” Warburton said.

“We have been very cautious on Renault due to fears about debt, liquidity, a weak product line-up, emerging markets exposure and Nissan challenges. All of these fears have been realised and we continue to regard Renault as one of Europe’s most challenged automakers, with probably the poorest product offer and weakest brand amongst peers. Nissan continues to struggle with a collapsed U.S. market and difficult exchange rate. However, we see clear signs of light and the potential for improvement in both Renault and Nissan,” he said.

Neil Winton – April 15, 2009

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