Yes, Ferrari’s (NYSE:RACE) factories are located in the center of Italy’s coronavirus tragedy, but the company has said it hopes to reopen its Maranello and Modena factories on 14 April provided it has guaranteed parts supplies.
Investors expect Ferrari profitability to slow a bit in Y 2020 but recover and resume accelerating in Ys 2021 and 2022.
Ferrari has been strong in prior recessions, the order book is strong and we do not expect demand not expected to slide.
Morgan Stanley notes that the company has confirmed that demand remains solid and they have recieved no cancellations of orders related to the coronavirus pandemic,
Ferrari may have to support some dealers financially, and payments from F1 look to be in doubt as the racing season is still shutdown.
Reflecting those conditions, EBIT estimates (earnings before interest and tax) will likely be lowered by 15% in Y 2020.
EPS (earnings per share) estimates could fall 11% in Y 2020, increase 13% in Y 2021 and increase 4% in Y 2022, reflecting the 1-off profit hit from F1, but also a lower tax rate and a change in depreciation phasing.
Ferrari, controlled by Italy’s Agnelli family through Exor, reported EBITDA profits totalled $1.4-B in Y 2019, and before the implications of the coronavirus came up, predicted operating profits would rise to between $1.5 and $1.57-B in Y 2020.
In Y 2019, Ferrari sold 10,131 vehicles, + 9.5% on the prior year, boosted by sales of the Portofino and 812 Superfast. Plus, it launched its 1st hybrid, the SF90 Stradale.
In a note, Morgan Stanley said it expects a 4-wk disruption to shipments, extra costs for dealers and lost F1 revenue.
“We make up an estimated half of the lost shipments in the 2nd half, and EBITDA back to pre-crisis levels by 2021,” Morgan Stanley automotive analyst said.
Morgan Stanley expects Q-2 shipments to fall about 28% compared with the same frame last year after a flat Q-1.
“Following the 2nd Quarter disruption, we expect the company can make up roughly half of the lost 700 units of production by year-end through Saturdays and extra shifts. For the F-Y 2020, we forecast Ferrari shipments to be up 1.0% at 10,233 units,” Morgan Stanley said.
Ferrari’s share price has been volatile lately, marking 179.21 in February after the financial results, and diving to 129.99 on 12 March before racing back up to 152.57 in New York Tuesday
HeffX-LTN overall technical outlook for RACE is Neutral, there is Key resistance 167.47, and support is 151.72, 2 of my Key indicators have turned Very Bullish as the stock is still oversold. Technically, it is Neutral with a Bullish bias.
Ferrari finished at 152.57, -1.72 Tuesday in NY, and shares were raised to Buy from Hold at HSBC.
Ferrari will continue to create value in the long term. Ferrari is a quality 1st long term luxury products investment, and I have called it at it at 200+/share long term, adjusting it to 200/share short term (after the virus) and siding with BAML to 230 long term for now.
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