"Outlook for Opel much improved vs our fears: We upgrade PSA stock to 'Neutral' from 'Sell' as our thesis around a slow and costly turnaround at Opel/Vauxhall (OV) appears to be wrong," Citigroup wrote in a research note.
Last week, PSA said buoyant sales of new models had helped it shrug off losses at its newly acquired Opel arm, lifting its overall 2017 revenue, profit and operating margin to new records.
Rebounding from a 2012 brush with bankruptcy, PSA is pursuing an ambitious turnaround under Chief Executive Carlos Tavares, former second-in-command to Renault boss Carlos Ghosn. The group is also racing to bring the Opel lineup into compliance with EU carbon emissions targets.
PSA shares are up by around 13 percent so far in 2018, beating a 1.4 percent decline on the STOXX Europe 600 Autos & Auto Parts index.
(Reporting by Sudip Kar-Gupta and Blandine Henault; Editing by Mathieu Rosemain)