Goldman Sachs sees catalysts for Fiat Chrysler beyond bid speculation

Goldman Sachs likes Fiat - especially the Maserati bit (well, don't we all?); Jefferies thinks Best Buy will benefit from store closures at hhgregg; Mackie keeps the faith with Cardiome

It's a 'buy' (yes, but what about the stock?)

Goldman Sachs has reiterated its 'buy' recommendation on Fiat Chrysler Automobiles NV (NYSE:FCAU) after its recent good run, which was prompted by bid speculation.

The shares are up 16% over the past seven trading days on press reports of Chinese interest in acquiring some or all of Fiat Chrysler (FCA).

With the shares at US$13.49, and Goldman's price target standing at US$22.40, it is small surprise the investment bank is still a buyer of the cars maker.

Based on a sum-of-the-parts (or break-up) analysis, the shares could be worth €32.5 – roughly equivalent to US$38.23 – Goldman believes.

“Within the global auto industry we believe FCA has an attractive brand portfolio,” the bank said.

“We see five fundamental key drivers for further re-rating: (1) FCA’s largest ever product rejuvenation in NAFTA, (2) NAFTA mix improvement as FCA gears its exposure more towards SUVs and pickups, (3) EMEA, driven by the rejuvenation of Alfa and introduction of Jeep, (4) LATAM recovery in end-markets, aided by Pernambuco tax credits, and (5) Maserati as Levante momentum continues,” the Goldman team said.

“In addition, we see a catalyst for structural value creation from a potential spin-off of Magneti Marelli and Comau, as FCA discussed in the 2Q earnings call, and further M&A discussions,” it added.

Jefferies has raised its second quarter earnings estimates for big-box electronics retailer Best Buy Co Inc (NYSE:BBY), as it believes the company should be able to grow domestic sales at the higher end of – or even above – the company's guidance range of +1.5% to 2.5%.

The broker reckons the retailer is doing well in mobile, appliance and gaming consoles. It thinks the retailer will have picked up some extra sales from the hhgregg store closures.

The stock trades at US$61.75; Jefferies has a price target of US$60, making it no more than a 'hold'.

Mackie Research is keeping the faith with Cardiome Pharma Corp (NASDAQ:CRME), despite yesterday's bad news from the US Food and Drug Administration (FDA).

The FDA advised the company that the current data package would be insufficient to support a resubmission of the Brinavess new drug application, resulting in the share price plunging from US$3.87 at Friday's close to US$2.60 at yesterday's close.

Mackie is removing our US sales estimates for Brinavess from its valuation model until there is better clarity on the regulatory path forward.

Nevertheless, it is maintaining its 'hold' rating and target price of US$3.50.

“Our valuation is based on applying a 4.0x EV/Sales multiple to our 2018 sales estimate of US$41.6M and discounting back by 15%,” the broker explained.

“CRME has incurred a US$300M net operating loss to date. After removing the US sales estimates of Brinavess from our model, we believe new product acquisitions are imperative to turn CRME cash flow positive,” the broker said.


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