The automobile industry is notoriously cyclical. Even the biggest and most established companies make billions on the upswing and then lose billions on the downswing as consumer demand ebbs and flows. It is important not to extrapolate either trend indefinitely into the future – a mistake investors continue to make. Instead, car-manufacturers, provided that they have the means to survive the downturn, should be bought precisely when their stocks are at multi-year lows amid falling revenues, record losses and negative cash flows. Which brings us to Stellantis.
Formed by the merger between Peugeot and Fiat Chrysler in 2021, the company is the fifth biggest auto-maker in the world. But revenue declined by 17% and 2% in 2024 and 2025, respectively, which, due to the company’s high amount of fixed costs, was enough to drag operating cash flows down from €22.5B in 2023, to a negative €4.7B last year. The stock followed suit, crashing 80% over the last 24 months.
This raises the question: is Stellantis a good investment now near €6 a share? Sales in the second half of 2025 were actually up 10% compared to the same period in 2024, so one can argue that the bottom has been reached. Furthermore, with equal amounts of debt and cash on its balance sheet, the company’s immediate survival is not under threat. But can we expect the stock to reverse to the upside soon?
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According to the Elliott Wave chart above, the answer is Yes. The current sell-off can be seen as a five-wave impulse, marked 1-2-3-4-5, which fits in the position of wave (c) of an expanding flat correction in wave II/B. That retracement was preceded by another impulse pattern to the upside between 2009 and 2018, labeled (1)-(2)-(3)-(4)-(5) in wave I/A. Taken together, these two patterns form a complete Elliott Wave cycle.
If this analysis is correct, the uptrend should soon resume in wave III/C. We can identify €4 as the invalidation level for this count, because at that price wave 3 would be shorter than both waves 1 and 5, which would violate the Elliott Wave rules. From the current price of €6, this gives us an attractive setup with 33% downside risk versus 200% to 400% of upside potential. Needless to say, we’ve recently added Stellantis to our stock portfolio.
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