Marchionne fails to win over Fiat bears
CEO seen as ‘genius’
MILAN • Buoyed by plans to spin off Ferrari, Sergio Marchionne of Fiat Chrysler Automobiles NV has supplanted Tesla Motors Inc.’s Elon Musk as the chief executive with the car industry’s best-performing stock. Analyst skepticism is as high as the share price.
The 49% jump in Fiat Chrysler shares since its New York Stock Exchange debut Oct. 13 reflects a turnaround in Europe, faster sales growth than other automakers and above all investors’ huge appetite for Ferrari, which Mr. Marchionne intends to spin off by year-end. The Italian supercar maker alone may be worth as much as ¤8 billion ($11.4 billion), UBS AG says, or more than half Fiat Chrysler’s market value.
Mr. Marchionne is already viewed by some investors as a miracle worker for pulling Fiat SpA back from the edge of bankruptcy more than a decade ago and acquiring a bailed-out Chrysler on favourable terms. Fiat Chrysler’s shares reflect the glow: They’re priced at about 13 times estimated 2015 profit, a richer valuation than most other major carmakers.
At the same time, Fiat Chrysler is the least-preferred major auto stock among analysts, according to data compiled by Bloomberg, and the percentage of buy ratings on the stock has been dropping since November. The company is burning cash, burdened with more debt than rivals and is less profitable, says George Galliers of ISI Evercore, who recommends selling Fiat Chrysler shares.
“Yes, Fiat is run by a genius with a unique focus on shareholder value,” Max Warburton of Sanford C. Bernstein & Co. said in a Jan. 28 report. “Yes, Fiat contains a number of attractive businesses. Yes, some of the growth plan may work. But haven’t expectations got far too high for a company that remains so fragile?”
Mr. Warburton sees Fiat Chrysler stock slumping almost 50% in the year ahead, justifying his underperform rating. A Fiat Chrysler spokesman declined to comment on analysts’ views on the stock.
The stock’s surge since the U.S. listing compares with a 3.2% drop in the same period for Tesla, which has gained 13-fold since its 2010 initial public offering.
Tesla shares peaked in September at about US$286, and have since tumbled on slowing sales growth in China, plunging oil prices and a comment by Mr. Musk that the electriccar maker won’t become profitable until 2020.