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Why Some Analysts Suggest Holding Fiat Chrysler Stock in 2018

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Jan. 4 2018, Updated 9:00 a.m. ET

Year-end review

So far in this series, we’ve covered the key factors driving Fiat Chrysler Automobiles (FCAU) stagnated revenues, improving profit margins, and low valuation multiples. The company’s stock has delivered outstanding returns of over 103% YTD (year-to-date) as of December 26, 2017—much higher than its peers (IYK) and the S&P 500 Index (SPY) (SPX-INDEX).

Below, we’ll discuss what Wall Street analysts are suggesting for its stock for 2018.

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Analyst recommendations for FCAU

According to the recent data compiled by Reuters, 43% of analysts covering Fiat Chrysler stock gave the stock a “buy” recommendation. Another 43% of these analysts recommend a “hold,” while the remaining 14%—only three of the total 23 analysts covering FCAU stock—suggest a “sell.”

Notably, as of December 26, 2017, FCAU had a market cap of ~$28 billion, compared with its market cap of ~$12 billion one year ago. But this was still much lower than the market caps of its peers.

Remember, changes in Wall Street analysts’ views can result in significant short-term movements in the stock price of a company, and so it’s important for investors to pay attention to analyst ratings.

Upside potential

On December 26, 2017, the analysts’ consensus 12-month target price for Fiat Chrysler stock was $23.07, which was about 24.7% higher than its market price of $18.50.

Analysts thus still appear to be positive about FCAU. The company’s ability to consistently improve its profit margins and debt position could be the primary reason why most analysts are still positive on Fiat Chrysler stock going into 2018.

Among peers, 46% of analysts gave General Motors (GM) a “buy,” with about a 12% upside potential. Only 17% of analysts gave Ford Motor (F) “buys,” and its price was already trading above its given consensus target price, while 44% of analysts recommend a “buy” for Ferrari (RACE), with ~10% upside potential in the next 12-months.

You might be interested in reading Market Realist’s Holiday Season Special: Reviewing Ford’s Performance in 2017 to learn more about Ford’s performance in the first three quarters of 2017.

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