Stellantis (STLA) has lowered expectations across earnings, balance sheet and cash flow after taking a front-loaded approach to charges and balance sheet actions, Morgan Stanley said in a note Tuesday.

The firm said Stellantis absorbed multiple costs at once, including changes to its EV platform in North America, warranty adjustments, new debt issuance, cancelled dividends and multiple one-offs embedded in 2025 adjusted operating income.

"Stellantis could have opted to spread negative news over multiple periods, but instead chose to take a highly front-loaded approach," Morgan Stanley said.

The firm also said Stellantis may be reassessing its strategy concerning Chinese OEMs, which are increasingly exporting and investing in overseas capacity, adding to pricing and margin pressure.

Morgan Stanley said the company's product pipeline is improving sequentially and now covers segments that were previously underrepresented.

Morgan Stanley maintained its equal-weight rating on Stellantis and lowered its price target to $8.30 from $10.90.

Shares of Stellantis were up 3.5% in recent Tuesday trading.

Price: 7.56, Change: +0.26, Percent Change: +3.53