Shares of Fiat Chrysler Automobiles NV (NYSE:FCAU) are on the move Thursday, pushing above the $15-a share level for the first time as prices further extend out of the eight-month trading range near $12.
There are multiple catalysts in play. Mainly, Wall Street has responded enthusiastically to reports of imminent M&A activity. Either a purchase of the company — in whole or in part — by a Chinese automaker; a possible spinoff of its luxury Maserati and Alfa Romeo brands; or possibly via a tie up with General Motors Company (NYSE:GM).
Certainly, there is value to be unlocked. Goldman Sachs analysts believe the company is worth twice as a much as a sum of parts versus its current enterprise value. Morgan Stanley analyst Adam Jonas believes Jeep alone with worth more than Fiat Chrysler in its entirety, at 120% of FCAU’s market capitalization.
Even Marchionne himself admitted during the company’s last earnings call that he had an obligation to “purify” FCAU’s portfolio of holdings as year-over-year revenue growth stalled.
Click to Enlarge Other dynamics include an expected ramp in auto purchases as a result of flood damage in Texas and Louisiana following Hurricane Harvey. Unlike homeowner insurance, most auto policies cover flood damage.
And the extent of the flooding and the importance of delicate electric systems in modern cars — and the difficulty and expense associated with diagnosing and fixing issues — suggests many vehicles will be full write offs.
Bottom Line on FCAU Stock
And that means many, check in hand, will be looking for new rides. And finally, investors are responding to a series of analyst upgrades.
Goldman increased their price target to $30.10 from $22.40 previously not only on M&A hype but increasing exposure to higher margin SUVs and pickups. Bank of America Merrill Lynch upgraded shares on Aug. 28.
The company will next report results on Nov. 2. Analysts are looking for earnings of 50 cents per share on revenues of $27.1 billion. When the company last reported on July 27, earnings of 69 cents per share beat estimates by 17 cents on a 0.1% rise in revenues.