Why One Analyst Says Fiat Chrysler Is Still One Of The Most 'Enticing' Stocks In Its Universe

Fiat Chrysler's improved free cash flow profile now makes the stock "one of the more enticing names" in the sector and by merely staying the course for the rest of the year its free cash flow could rise to 2.8 billion euro, the analyst commented. This alone could boost the European-listed stock by 40 percent if investors are fine with assigning a 10 percent free cash flow yield.

On the other hand, ongoing improvements to Fiat Chrysler's financials merely places the company on a "more even footing" with its Detroit-based peers who are similarly trading at compelling multiples based on free cash flow metrics, Lache continued. But the Detroit makers aren't facing "unique risks" that Fiat Chrysler is facing, including:

Up to 4 billion euro of fines from EPA and other regulatory bodies.
• A heavier cash burn if the North American market sees a downturn.
• Less "preparedness" for technological changes.


Finally, the analyst sees three potential scenarios ahead for the company:

1. A spin-off of the luxury brands could value Maserati at 4 billion euro and Alfa at half a billion euro — although there might not be an interested buyer.
2. A sell or spin of the Component business could be worth around 3 billion euro in the public markets.
3. A complete sale of the company could fetch at least a 20 percent premium to the current price.
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