Renault and Kering: Sector Rotation Opportunities in Automotive and Luxury Turnarounds

The departure of Renault's CEO Luca de Meo to Kering marks a pivotal moment for both industries. As talent migrates from automotive restructuring to luxury goods revitalization, investors face asymmetric opportunities in sectors mispriced by market overreactions. This article explores how sector rotation dynamics, valuation gaps, and operational catalysts create a compelling case for contrarian bets in Renault and Kering.

The De Meo Effect: Talent Reallocation and Mispricing

De Meo's five-year tenure at Renault (2020–2025) transformed the company from a declining automaker to a leader in EVs and cost discipline. Under his “Renaulution” strategy, Renault slashed costs by €3 billion, split its business into Ampere (EV-focused) and Horse (combustion), and achieved record sales of 2.265 million vehicles in 2024. Yet, Renault's stock price has lagged peers like Stellantis (+22% YTD) and Tesla (+18% YTD), despite its strong fundamentals.

Why the disconnect? Markets fear leadership uncertainty post-de Meo and underestimate the staying power of his reforms. However, the Ampere IPO—planned for late 2025—could unlock value. With a projected valuation of €8–10 billion, Ampere's standalone growth in EVs (targeting 30% market share in Europe by 2030) could catalyze a re-rating of Renault's stock.

Kering's Turnaround Play: An Outsider's Operational Edge

Kering, the parent of Gucci and Saint Laurent, faces a different challenge: stagnant sales (-12% in 2024) and declining margins (17% vs. LVMH's 22%). De Meo's appointment as CEO (rumored for July 2025) signals a strategic pivot toward operational rigor. His automotive background—experienced in cost-cutting, supply chain optimization, and tech alliances—aligns with Kering's need to modernize fragmented operations and lagging e-commerce (25% of sales vs. LVMH's 30%).

Key catalysts for Kering:
1. Gucci's Creative Reboot: Demna's arrival (July 2025) aims to revive Gucci's “heat” after Sabato De Sarno's minimalist tenure failed to stem a 23% sales drop. Demna's avant-garde Balenciaga legacy (sales quadrupled under him) suggests potential to reignite Gucci's cultural relevance and Gen Z appeal.
2. Operational Overhaul: De Meo's focus on margin expansion (target: 20%+ by 2027) and digital innovation (e-commerce goal: 35% within five years) could reduce Kering's reliance on Gucci, which contributes two-thirds of profits.

Valuation Gaps and Contrarian Bets

Renault:
- Metrics: P/E of 6.2x vs. Stellantis' 12.5x. EV/EBITDA of 3.8x vs. industry average 6.0x.
- Catalyst: Ampere's IPO could add €5–7/share to Renault's value.
- Trade: Buy Renault at current levels (€9.50) with a 12-month target of €14–16, supported by Ampere's valuation and cost discipline.

Kering:
- Metrics: P/E of 18x (vs. LVMH's 24x), undervalued despite its premium brands.
- Catalyst: De Meo's operational tweaks and Demna's creative success could drive a 20–30% upside.
- Trade: Accumulate Kering at €550/share (post-announcement dip to €490), targeting €680–750 by 2026.

ESG and Sector Rotation Risks

• Renault's ESG Edge: Its carbon neutrality target (2040) and EV focus align with ESG mandates, reducing regulatory risks.
• Kering's Sustainability Challenge: While Kering leads in materials innovation (e.g., recycled leather), operational inefficiencies require De Meo's cost discipline to maintain margins.

Conclusion: Sector Rotation for Asymmetric Returns

The automotive and luxury sectors are at inflection points. Renault's undervalued stock and Kering's operational turnaround under an outsider create a compelling contrarian pair. Investors should:
1. Buy Renault for its EV growth (Ampere) and undervalued multiples.
2. Long Kering as a leveraged play on De Meo's operational rigor and Demna's creative revival.

Both stocks offer asymmetric risk-reward: limited downside (Renault's cash flow, Kering's brand equity) and upside from sector rotation and catalyst-driven re-ratings.

“The market is not always rational, but it is always logical. Follow the catalysts.”

Disclosure: This analysis assumes no position in the mentioned securities. Always conduct independent research.