(News Bulletin 247) – The diamond group represents more than 15 billion euros on the stock market compared to 14.3 billion euros for its Japanese ally, not necessarily helped by the weakness of the yen. But this crossover above all illustrates the stock market rebirth of Renault on which Barclays is moving to “overweight”.

It’s a symbolic curve crossing but it says a lot about Renault’s “comeback” on the stock market. As Bloomberg noted on Monday, the diamond group is now worth more on the stock market than its Japanese ally Nissan.

Renault’s market capitalization currently stands at 15.12 billion euros, and the stock increased by 1.75% this Tuesday. For its part, Nissan Motors is worth 2,356 billion yen, according to Yahoo! Finance, or around 14.3 billion euros.

Bloomberg notes that Renault has for almost the entire duration of their alliance, which dates from 1999, run behind the Japanese group.

Certainly, Nissan is weighed down by the weak yen, which penalizes its capitalization once converted into dollars or euros. But we can also argue that the weakness of the Japanese currency may have supported its export volumes. Bloomberg also explains that the Japanese group, which has only progressed by 6% since the start of the year when the Nikkei 225 in Tokyo gained 19%, suffers from a lack of renewal of its range, from an absence of hybrid models in the United States and increased competition in China, where Renault is not present.

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Analysts more optimistic about Renault

Conversely, the diamond group has been on the rise since the start of the year. With an increase of 38.5% since January 1, the company managed by Luca de Meo quite simply signs the strongest progression in the CAC 40.

Several analysts (Berenberg, HSBC) recently raised their price targets on the stock, citing the group’s strong cash generation as well as the arrival of a significant number of new models (ten) this year which will protect its margins. Or a potential increase in the coming months of the group’s credit rating to “investment” category by the rating agencies, which would give it more room to increase shareholder returns.

This Tuesday Barclays also raised its opinion on the value from “online weighting” to “overweight”, the equivalent of “buy”, with a target raised to 60 euros against 36 euros previously.

The British bank had concerns about its financial balance sheet, its exposure to the “mass” market and about Ampere, its subsidiary dedicated to electric vehicles and software. But those concerns have been “allevated,” she explains.

Rethinking the alliance

The Barclays bank is impressed by the group’s R5, a modern and 100% electric version of a legendary model from the 70s and 80s and thinks “that it will sell very well”. “We are still mixed on the mass market in the European Union in general, but within it we can see Renault gaining share thanks to its – in our opinion – excellent product portfolio across Renault and Dacia brands”, continues the establishment. “In addition, thanks to very high cash flow and the sale of stakes in Nissan, the quality of Renault’s balance sheet is improving rapidly,” he adds.

Certainly the stock experienced a rally, but starting from a very low level, recalls Barclays. According to her, the stock still has potential given its prospects for improving results, management’s good track record, and quality products, such as its cost-effective platform for electric vehicles.

Note also that Renault is overtaking Nissan at a time when the two members have revisited their alliance – since last fall – with the end of shared structures, such as the joint purchasing company. This also results in the gradual disengagement of Renault from Nissan’s capital. The two companies are now on an equal footing in terms of direct cross-shareholdings, each owning 15% of the other. The balance of Renault’s historic 43.4% stake in Nissan has been housed in a trust responsible for gradually selling shares. Sales of Nissan units took place in December and then at the end of last March. The trust now only owns around 22% of Nissan’s capital, compared to 28.4% initially.