Renault shares posted the strongest gains on both the CAC 40 index and across the European auto sector on Thursday, buoyed by a Bank of America (BofA) analyst upgrade to "buy."
Around 2:00 p.m., Renault stock was up 6.1%, while the CAC 40 advanced by 0.2% and the STOXX Europe 600 Automobiles & Parts sector index gained 2.2%.
In a research note published earlier in the day, BofA argued that Renault's shares are significantly undervalued, noting that the net cash position of the French automaker, combined with its stake in Nissan, now roughly equals the group's entire market capitalization. This, the analysts said, implies that the market is assigning zero value to Renault's core automotive business--a judgment BofA considers excessive.
The bank's analysts also anticipate a more favorable regulatory environment, with Brussels expected to ease CO 2 emission rules, a move that should benefit carmakers including Renault.
While BofA expects margins to remain under pressure next year, it also forecasts that Renault's earnings per share (EPS) will exceed current market expectations.
Furthermore, starting in 2027, Renault could offer a dividend yield of 6% to 7% per year, positioning the stock as a "recovery" play--an investment made in anticipation of a business turnaround.
As a result, BofA has upgraded its rating on Renault from "neutral" to "buy," raising its price target from 38 to 42 euros.
Despite Thursday's surge, Renault shares are still down about 21% for the year.
