Renault share price has remained in a tight range in the past few months. This could change as investors buy the dip after the recent financial results, which showed that its business was doing well. It was trading at €35.25, up by 14.4% from its lowest point this year.
Renault earnings review
Renault, one of the biggest automakers in France, is doing well in a highly difficult environment. Results released today, Oct. 23, showed that its third-quarter revenue rose by 6.8% in the third quarter.
Renault made over €11.4 billion in the quarter as brands like Dacia Bigster continued doing well. Its revenue also jumped because of its financial service, which rose by 18% to €1.6 billion. Analysts polled by Reuters expect the revenue to move to €11.5 billion.
In the statement, the company said that its European passenger car sales rose by 10.9%. It strong sales were spread across the board, with Renault rising by 5.5% and Dacia and Alpine rising by 16.1% and 306%.
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Renault has sold over 1.16 million vehicles in the first nine months of the year, a 3.8% increase from the same period last year. It sold 361,575 vehicles in the third quarter. In a statement, Duncan Minto, the CFO said:
“We confirm our full-year guidance, targeting a Group operating margin around 6.5% and free cash flow between €1.0bn and €1.5bn. Also, we are actively shaping our next mid-term plan, designed to accelerate the Group’s transformation and unlock future opportunities.”
Renault now expects that it operating margin will be about 6.5%, while its free cash flow will be between 1 billion and 1.5 billion euros, respectively
Major challenges remain
Renault is still going through major challenges as signs show that demand for vehicles in Europe is slowing. At the same time, while it is not exposed directly to the US, the ongoing trade war with China could have an impact on its operation.
One way that this will happen is in China’s strategy to limit the supply of rare earth materials. Limits to these exports would impact its operations as China has a major market share in the industry.
The other major challenge is that cheaper Chinese vehicles by companies like Xpeng, BYD, and Li Auto are starting to flood the market. This growth may hurt Renault and other European companies like Volkswagen and BMW.
The other major challenge is that Renault is not a cheap company as it trades at a forward multiple of 19.49. This is a higher multiple than other companies like Volkswagen and BMW.
Renault share price technical analysis
Renault stock price chart | Source: TradingView
The daily chart shows that the Renault stock price formed a double-top pattern at €49.5 and a neckline at €38.50, its lowest swing in April. It then plunged on July 15 after the company published its financial results and issued a profit warning.
The stock then formed an island reversal pattern, which is a popular reversal sign. Therefore, the stock will likely continue rising as bulls target the key resistance point at €38.50, its lowest level in April and June. This target is about 10% above the current level. A drop below the support at €32.5 will invalidate the bullish view.
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