Ferrari (NYSE:RACE) is a Long Term Luxury Brand Hold

Ferrari (NYSE:RACE) is a Long Term Luxury Brand Hold

$RACE

Luxury goods companies tend to do better in recessions because wealthier people maintain disposable income, and this C-19 coronavirus chaos caused and instant recession.

This applies to Ferrari (NYSE:RACE) as the demographic it caters to are generally going to be able to afford expensive sports cars in good times or bad, it is a defensive stock.

On 4 May Ferrari reported its Q-1 results. They were better than the market expected. On the Top line, it had revenue of $1.02-B, $168-M higher than analyst expectations. On the Bottom line, it had earnings of 0.98, 0.08 higher than the consensus estimate.

While revenue declined 1% in Q-1, it shipped 2,738 cars, 128 more than a year earlier, at the same time, it cut guidance for the year and warned Q-2 would be affected by the C-19 coronavirus chaos.

Its 2 plants in Italy have reopened and as of Monday, 18 May Ferrari is back in full production.

As I write this Ferrari’s market cap $30-B+, of $10-B+ more than Ford’s valuation.

Ferrari’s revised guidance for Y 2020 includes sales growth of 3.4-3.6% and earnings per share growth of 2.4-3.1%. While it’s lower than its guidance at the beginning of the year, it’s good to know its management is still enthusiastic about its business despite the medical malpractice that practically shutdown the world.

As of now, we have yet to witness any abnormal or untoward cancellations, although several have been incurred primarily in Australia and the United States, but nothing so far that we would deem to be alarming,” CEO Louis Camilleri said in the Q-1 Y 2020 conference call.

While history is certainly not this positive, it can inform us. A reading of the level of cancellations, during the last financial crisis reveals that the peak of cancellations, and postponements took several months to affect the order book, and thus it is still too early to come to any final conclusion.”

Ferrari is The Aristocrat of the automotive sector.

Enzo Ferrari’s iconic Italian Supercar manufacturer claimed the title according to the latest Brand Finance Global 500 2019 report launched at the World Economic Forum in Davos.

HeffX-LTN overall technical outlook for RACE is overall Neutral with a Bullish bias, there is Key resistance 163.77, and Key support is at 157.55.

Our overall technical outlook is Very Bullish in here

Ferrari finished Monday at 162.76, +5.37 in NY.

The Maranello Outfit’s 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. The stock is now considered defensive in the sector.

Have a healthy day, Keep the Faith!

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Paul Ebeling

Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge. Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he it the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.