Fiat Chrysler Attempting to Rejuvenate Merger with Renault

Fiat Chrysler Automobiles (Ticker Symbol: FCAU) and French carmaker Renault are attempting to find ways to rejuvenate their plans to merge.  Currently, Renault is a large shareholder is the Japanese automobile company, Nissan.  Nissan is urging Renault to reduce its nearly 44% stake in the company to help complete the merger.  The French government is the largest shareholder of Renault and they are the main reason why the merger was blocked.  If the merger becomes finalized, the deal has the opportunity to make Fiat Chrysler the world’s third largest automobile maker.

This comes on the heels of a disappointing earnings and revenue release from Fiat Chrysler last quarter.  The company reported an earnings per share miss of .40 cents per share vs. Wall Street analysts’ expectations of .52 cents per share.  In addition, net revenue failed to meet Wall Street expectations and declined 5% to $27.3 billion vs. analysts’ estimates of $29.07 billion.  Fiat Chrysler sales have slowed in both North America and Europe but the company is seeing an uptick in sales from new U.S. pickup trucks, including the new Jeep Gladiator and the Dodge Ram. 

Above is a longer-term view of Fiat Chrysler’s stock spanning over the course of the past five years.  The stock spent the third quarter of 2014 until the third quarter of 2017 stuck in a three-year-long trading range between the $12.00 and $6.00 price levels.  The stock finally broke out of its trading range to the upside after a positive earnings and guidance report acted as a catalyst to give the stock legs to continue higher. The stock proceeded to rally over 100% over the next two quarters and trade to an all-time high of $24.95 on January 22, 2018.

Fiat Chrysler’s stock then put in a Double Top formation. Traders and investors sometimes look at Double Top patterns for a possible pause within the current trend which can, at times, lead to a reversal, as occurred in Fiat Chrysler’s case.  Unfortunately for Fiat Chrysler’s shareholders, the stock took a negative turn and began to trade lower.  In the third quarter of 2018, the stock broke through the uptrend it began the year before and crossed below its 100-week Moving Average.  Currently, Fiat Chrysler’s stock is finding support just above its 200-week Moving Average.

(Chart above courtesy of ​​)

Based on a survey of 5 analysts offering 12-month price targets, the average price target for Fiat Chrysler’s stock is $19.74. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $13.76.

Fiat Chrysler has made a deal with Aurora, a self-driving car startup,  to create self-driving commercial vehicles earlier this week.  The vehicles will be available for use by any third-party with a delivery-to-consumer need, for example, FedEx delivering packages to consumers.   Investors in the automobile space should look to Fiat Chrysler’s earnings call on July 31, 2019 for fresh news within the sector.