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.”
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!
Latest posts by Paul Ebeling (see all)
- “I Do Not Sell Cars, I Sell Engines That Power Them,” Enzo Ferrari - June 2, 2020
- Sitting on a Pile of Cash 2.0? Gold Mitigates Risk - June 2, 2020
- The Prudent Rules for Buying Stocks in This Market - June 2, 2020