Renault (ENXTPA:RNO): Evaluating Valuation After Strategic Geely Partnership in Brazil’s Automotive Market

Renault (ENXTPA:RNO) just finalized a strategic agreement that will see Geely acquire a 26% stake in Renault do Brasil. This partnership targets Brazil’s expanding automotive market and combines expertise to advance zero and low-emission vehicles in the region.

See our latest analysis for Renault.

Momentum around Renault has been hard to ignore lately, with the partnership news coinciding with a strong 8.4% 1-month share price return and a nearly 9.5% gain over the past 90 days. However, the stock remains down almost 23% year-to-date and its 1-year total shareholder return is still negative. This suggests that optimism is building, but recovery from last year's weakness is still underway. Longer-term holders have fared far better, with a 29% total return over five years. This reflects Renault’s resilience and potential for upside as strategic moves like the Geely partnership take effect.

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With shares rebounding but still trading well below last year's levels, and given Renault is at a 28% discount to analyst price targets, investors must ask if the stock is still undervalued or if expectations for growth are already reflected in the price.

Most Popular Narrative: 25.7% Undervalued

Renault's last closing price is well below its fair value according to the prevailing narrative, setting the stage for a potentially compelling investment case. This perspective comes from PittTheYounger, who has recalibrated key assumptions in the wake of recent shocks but still arrives at a notably higher valuation than the market.

With today's shocking quarterly earnings, Renault's prospects certainly have taken a turn for the worse. Not disastrously so, but, together with the unpleasant surprise of Luca de Meo's departure as CEO, markedly enough to warrant a revision of my originally rather upbeat estimates about the automaker's valuation.

Read the complete narrative.

Why does the narrative still point to a much higher value, even after sharply downgrading growth and profitability forecasts? As the numbers get toughened by high discount rates and trimmed expectations, something unexpected still tips the scales in favor of Renault. Find out what factor keeps this valuation buoyant despite all the uncertainty on the horizon.

Result: Fair Value of €49 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent balance sheet concerns and the threat of new tariffs could quickly undermine Renault’s margin gains and cause valuations to move lower.

Find out about the key risks to this Renault narrative.

Build Your Own Renault Narrative

If you have a different perspective, or want to dig deeper into Renault’s outlook using your own analysis, it’s quick and easy to craft your own view in just a few minutes. Do it your way

A great starting point for your Renault research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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