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Ram Truck Recall Could Hurt Fiat Chrysler Stock

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Fiat Chrysler stock

In the week ending May 12, 2017, Fiat Chrysler Automobiles (FCAU) stock traded on a negative note and ended the week at $10.87 with a loss of ~4.4%. On May 12, the company announced its decision to voluntarily recall over one million Ram pickup trucks in the US. Before we find out some key technical levels for Fiat Chrysler stock, let’s take a quick look at the recent update.

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Ram truck recall in 2017

According to a Reuters report published on May 12, the company will likely “recall more than 1.25 million pickup trucks worldwide to address a software error linked to reports of one crash death and two injuries.”

Jeep and Ram pickup trucks are two key brands in Fiat Chrysler’s US portfolio. While a Ram pickup truck recall could potentially impact its sales, it would also add a huge recall-related cost burden to Fiat Chrysler’s balance sheet. The potential vehicle recall has reignited a debate about vehicle safety regulations in the US.

Previously, Fiat Chrysler reported solid adjusted EPS (earnings per share) of 0.43 euros, or $0.47 in 1Q17—approximately 26% higher than its EPS in 1Q16. Fiat Chrysler’s profit margins continued to expand on a YoY basis for the fourth consecutive quarter in 1Q17.

Note that despite recent improvements, Fiat Chrysler’s profit margins are much lower than its peers (VCR) including General Motors (GM), Ford (F), and Toyota (TM).

Key technical levels

Last week, Fiat Chrysler stock turned negative after posting an all-time high near $11.65 on April 26, which should continue to act as a stiff resistance. Currently, its 14-day relative strength index is hovering at 54.8, which suggests weakening momentum.

On the downside, an immediate horizontal support lies near $10.60. A violation of this support level could attract fresh sell-off in Fiat Chrysler stock towards the next support level of $9.50.

In the next part, we’ll learn about Tesla’s recent price movement and its key support and resistance levels this week.

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