Ferrari (NYSE:RACE) stock is down just 2.5% Y-Y, when even the S&P 500 is down 11% over the same frame
Ferrari is a luxury brand and trades at 35.01 PE/ratio (TTM), surprising considering the coronavirus chaos.
The Big Q: Why is this happening and is it short selling opportunity?
The Big A: Because Ferrari is in a strong business with a strong brand and No.
Ferrari holds one of the most valuable brands in the world, and possibly the best, according to brandfinance sources.
Ferrari’s margins are the strongest in the automotive sector at 23.7% (2020 EBIT) thus validating that brand’s strength.
The multiples Ferrari trades for include the effects of these huge margins.
Even so, some think that the impact from the closed factory, closed markets and the loss of income and wealth by its customers will necessarily affect the sales and earnings levels, but not the case, Ferrari’s order book is full, there have been no cancellations during this chaos. Money and or good credit and the ‘want to buy a new Ferrari‘ will not get you 1 unless you are invited and after a full background check, Ferrari is very discerning in this regard.
It looks to me like Ferrari’s business model is not exposed to the coronavirus chaos. So, Ferrari will continue to trade at high multiples, and we are not seeing a lot of selling, and of course the insiders are not sellers either.
If 1 were to short Ferrar1 it would be selling into into the introduction of a most anticipated model launch of its Thoroughbred FUV plus the growth it will produce. So, selling in front of an acceleration in growth when the coronavirus chaos was not significant would be a bad bet.
Our overall technical outlook is Bullish to Very Bullish in here, as 3 of my Key indicators are Very Bullish.
Ferrari finished at 157.01, -4.33 Monday 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.
Have a healthy day, Keep the Faith!