Ferrari (NYSE:RACE) Forward Expectations: Stock Vs Cars

Ferrari (NYSE:RACE) Forward Expectations: Stock Vs Cars


Ferrari’s (NYSE:RACE) earnings announcement in September 2018, had analysts consensus outlook seemingly Bearish, with earnings expected to decline by -6.7% in the upcoming year compared with the past 5-year average growth rate of 24%.

But, now with a railing-12-month profit of EUR 535-M, the consensus growth rate suggests that earnings will drop to EUR 500-M by Y 2019. But as those of us who follow the iconic Italian Supercar maker have come to know, the Maranello outfit likes to surprise.

Below is commentary on the longer term outlook the market has for Ferrari.

The longer term view from the 21 analysts covering RACE is 1 of positive sentiment.

Broker analysts tend to forecast up to 3 years ahead due to their lack of  understanding about the business of luxury brand, Ferrari.

To understand the overall trajectory of RACE’s earnings growth over these next few years, there is a  fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

NYSE:RACE Future Profit December 17th 18
NYSE:RACE Future Profit 17 December 20 18

By Y 2021, RACE’s earnings should reach EUR 595-M, from current marks of EUR 535-M, resulting in an annual growth rate of 6.7%.

This leads to an EPS of EUR 4.4 in the final year of projections relative to the current EPS of EUR 2.83.

This high rate of growth of revenue squeezes margins, as some analysts predict an upcoming margin contraction from the current 16% to 14% by the end of Y 2021.

Future outlook is just 1 component when building building an investment case for a stock.

For Ferrari there are 3 Key factors you should further research, as follows:

  1. Financial Health: Does it have a healthy balance sheet? It does.
  2. Valuation: What is Ferrari worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? We see Ferrari undervalued and mispriced by the market now.
  3. High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of Ferrari? We believe Ferrari is the Aristocrat of the automotive sector and has strong growth potential ahead.

Ferrari cars

Some hedge fund managers are content with vintage and classic Ferraris, as there are Ferraris and then there are Ferraris.

A red 1962 250 GTO owned by technology executive Greg Whitten sold in August for a record $48.4-M. Just 36 were made. And it went to auction with a financial guarantee.)

More owners are buying and barely driving Supercars because low mileage means a higher price later on. This is called Garage Art.

Vintage cars, as a category returned 288% in the past decade, according to the Knight Frank Luxury Investment Index, or more than 2X that of the S&P 500 Index.

US stocks have risen steeply, but Ferrari prices are up more over the past 10 years.

Buying the right car is like buying the right stock.

You can pay more to buy the best, because at the end, it will be worth more.

Having money will not always get you a Ferrari Supercar, as the Maranello outfit allows only clienti who race in its motorsports program to buy the Special Edition 488 Pista Piloti at $500,000 each.

Some Ferrari clienti have lines of credit with the firm allowing them borrow up to 70% of the appraised value at a friendly rate.

Stay tuned…

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