Ferrari (NYSE:RACE) Dips on Profit Taking, Maserati IPO Speculation.
Note: The short interest is extremely low for RACE with fewer than 1% of shares on loan, indicating that investors who seek to profit from falling equity prices are not currently targeting Ferrari.
Ferrari (NYSE:RACE) shares gaped lower at the open Thursday as an analyst warned of valuation concerns, a potential Maserati IPO, emerging threat from rival luxury brands, and risk from the Italian Supercar maker potentially entering the SUV market with its FUV in Y 2020.
Morgan Stanley, downgraded RACE to underweight a client note released pre-market open Thursday.
“The primary driver of our change of view is valuation,” the analyst said, noting the carmaker’s “doubling of the share price year to date, leaving 14% downside to our price target” of 100.
Noting that Ferrari was itself a successful Fiat Chrysler (NYSE:FCAU) spinoff, he warned of tail risk from “copycat premium and ultra-premium auto carve-outs” while singling out McLaren, Aston Martin and Lamborghini as competitive threats.
“We would urge investors to prepare for a number of new supercar entrants to the public equity market,” he wrote.
A potential Maserati IPO also could represent “ever so slightly, more choices for investors to consider in this segment,” he cautioned.
Fiat Chrysler shares ran up last month on reports that the Italian-American automaker could dramatically revamp its businesses, including a spinoff of the luxury Maserati and Alfa Romeo brands.
Finally, the MS analysts believes Ferrari is developing a 4-door utility vehicle based in part “on our discussions with management.” That could open up new markets such as China for Ferrari, but also “exposes the brand to unexplored segments and unexplored customers,” he added.
My look is quite different, there as No competitive Supercar brand Vs Ferrari, all of the cars mentioned are either entry level SuperSports cars, or mid-level SuperSports cars (and bit players in the sector), both Alfa Romeo are the luxury brands of Fiat-Chrysler and do not compete with Ferrari in any sense, neither one are stand alone brands.
Fiat-Chrysler’s only possible spin-off or sale is Jeep, and it will likely go to the Chinese.
I do not see McLaren, Lamborghini or Aston as threats to the Ferrari brand or market.
Ferrari’s margins are the highest in the sector, and the firm pays a dividend, I see it as the Aristocrat, among Serfs.
I see the major support at 104 and a reasonable buy point.
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Ferrari stock is the most highly rated in IBD’s Auto Manufacturers group, dipped 7.1% to close at 108.59 Thursday.
The stock marked an all-time high of 118.10 Wednesday (where there as selling at the close) and has advanced 120% from a cup-with-handle breakout in July 2016.
|NYSE:RACE||107.66||7 September 2017||-9.19||111.21||111.6||107.31||2,689,502|
|HeffX-LTN Analysis for RACE:||Overall||Short||Intermediate||Long|
|Neutral (0.18)||Neutral (-0.09)||Neutral (0.03)||Very Bullish (0.58)|