Fiat Chrysler Stock Rally Stalled by Sell Rating

Goldman Sachs sees several short-term headwinds for the European automaker

by Patrick Martin

Published on Jul 16, 2019 at 9:58 AM

One of the worst stocks on the New York Stock Exchange (NYSE) today is Fiat Chrysler Automobiles NV (NYSE:FCAU), down 4.3% to trade at $13.56, after Goldman Sachs weighed in the European automakers, initiating coverage on FCAU with a "sell" rating. The analyst in coverage sees near-term challenges for earnings growth in North America, as well as other headwinds such as trade tensions, Brexit, and carbon dioxide (CO2) emissions targets. 

Today's pullback interrupts what was a nice run on the charts for FCAU this summer. Since bottoming at $12.58 on May 31 amid auto tariff tensions, the shares had added 13% through last night's close, and last week toppled their 200-day moving average. While the auto stock has surrendered this trendline in early trading today, it is still holding above its year-to-date breakeven level. 

Analyst sentiment is pretty evenly skewed for a stock that has shed 23% year-over-year. Of the nine brokerages in coverage, four rate it a "buy" or better, with the other five doling out tepid "holds." As far as the average 12-month price target, it sits all the way up at $20, territory not traded at since June 2018.

In the options pits, puts are the preferred vehicle for trading. FCAU's 10-day put/call volume ratio of 2.52 on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 95th percentile of its annual range, indicating not only that puts have doubled calls in the past two weeks, but also that the rate of put buying has been much faster than usual.

Options are an intriguing route right now, because the equity has had a tendency to make bigger moves than options traders were pricing in over the past year. The stock's Schaeffer's Volatility Scorecard (SVS) sits at 98 (out of 100), which could make buying premium an even more attractive choice. 

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