- Morgan Stanley analyst Adam Jonas raised his target price for FCA and called it a top pick.
- Future IPO spinoffs are driving his optimism.
- FCA CEO Sergio Marchionne is likely to consider an IPO of Maserati in 2018.
We’ve come a long way from 2009, when Chrysler was headed into bankruptcy after a government bailout. Back then, even Chapter 11 was a plus: there were serious discussion in the White House about simply letting Chrysler go into liquidation.
Fiat and CEO Sergio Marchionne arrived to take Chrysler off the taxpayers hands (not right away, but eventually by buying all the Treasury’s equity). Flash forward to 2017 and Morgan Stanley analyst Adam Jonas is so pleased with how far Marchionne and Fiat Chrysler Automobiles have come that on Thursday he upped his price target to 16 Euros from 15 Euros (FCA, headquartered officially in London, reports its financial in Euros, even though it trades on the NYSE).
So let’s call it about $US19, versus where FCA is currently trading, roughly $US17.
FCA is also Jonas’ top pick in the auto sector.
But Jonas’ positive outlook hinges on his expectation that FCA will continue to break itself up, spinning off lucrative assets just as it did with Ferrari in 2015 when the brand went public (Ferrari shares have risen almost 100% in 2017).
“FCA’s track-record in strategic value enhancement speaks for itself,” he wrote in a note to clients. “Embedded within the FCA portfolio are some of the most attractive brands in the auto industry….”
He then listed Jeep and Maserati, both of which have been widely discussed of late as spinoff and acquisition possibilities.
Jonas is simply giving voice to chatter that’s been prevalent in the financial community about FCA for years now. The Ferrari IPO was the test run, and it’s worked out phenomenally well. Maserati could be next, and an IPO moment could arrive soon, as Marchionne intends to step down as CEO of FCA in 2019.
FCA plans to support the value of a stand-alone Maserati by adding the carmaker’s SUV offerings; the Levante has been a success, and a smaller crossover will follow.
Jeep is a different story. Without it, FCA will effectively be a brand with “Chrysler” in its name that isn’t really selling very Chrysler or Dodge products. Only RAM, the pickup-truck brand will remain.
That said, of all brands, Jeep is the most valuable, so it might be too tempting for Marchionne to keep it.