Ferrari (NYSE:RACE) Starts as a Small Race Car Company and in 72 Years Races to a $27-B Automotive Brand

Ferrari (NYSE:RACE) Starts as a Small Race Car Company and in 72 Years Races to a $27-B Automotive Brand

$RACE, $FCAU, $F

In October 2015, Ferrari’s IPO on the NYSE valued the company at nearly $10-B. Now, less than 4 years later, the company’s market cap has more than 2X’d, to $27-B. This makes the carmaker one of the most valuable and recognizable brands in the world.

Ferrari (NYSE:RACE) was not always the global luxury brand that’s now being traded in Milan and New York. The company’s early days as a maker of racing cars were humble, and it took an Italian associate of Enzo Ferrari, Luigi Chinetti to begin the transformation into a purveyor of glamorous supercars for the world’s richest. The company’s success drew takeover interest, and later rivalry, from Ford (NYSE:F) before Ferrari became part of Fiat and eventually Fiat-Chrysler Automobiles (NYSE:FCAU).

For many years, Ferrari limited its annual production to preserve the exclusivity of its cars. When I bought my 1st Ferrari they were making about 200 cars per year.

But since its IPO in October 2015, the Maranello Outfit has steadily increased the number of cars it delivers to old clients and new customers. In Y 2018, 9,251 new Ferraris found their way to customers around the world, an increase of 852 cars, or 10.2%, over Y 2017.

But, even at more than 9,000 cars a year, Ferraris are rare. Most of the company’s models are limited in that its sales are limited not by how many people want to buy a car but by how many it can make. Econ 101: Supply/Demand. Ferrari’s demand out strips its supply

Below is the story of Ferrari’s incredible 72-year drive to become the Aristocrat of the world’s automotive sector.

In Y 1908, Enzo Ferrari, at 10 anni, saw his 1st car race and immediately became hooked. As a young adult, Enzo was drafted by the Italian army to fight in World War I.

After the war, Enzo had a hard time finding work in the auto business. He applied to work at Fiat but was rejected because of an abundance of unemployed war veterans. Eventually he found work at smaller automakers.

By the early 1920s, Enzo landed a job at Alfa Romeo as a race-car driver. Fellow drivers at the company included legendary aces like Tazio Nuvolari, here in an Alfa.

In Y 1929, Enzo launched Scuderia Ferrari, his racing team. There was no car company yet, the Scuderia consisted of a group of drivers who raced the cars they owned.

The team raced mostly Alfa Romeo’s. By Y 1933, Scuderia Ferrari had essentially become Alfa’s racing division.

In Y 1937, Enzo shut down Scuderia Ferrari and became the head of Alfa Romeo’s factory racing operation, Alfa Corse. He was not happy.

A week after leaving Alfa Corse in Y 1939, Enzo started up Auto Avio Costruzioni. The AAC 815 is the 1st car Ferrari’s startup built on its own.

a car on display

AAC built just 2 815 cars in Y 1940. Both were prohibited from carrying the Ferrari name because of a non-compete agreement between Enzo and Alfa.

WWII forced Ferrari to curtail his racing activities, Enzo got his company got back to work immediately following the war. And in Y 1945, the company introduced a new V12 engine that would become one of Ferrari’s signature offerings.

a truck is parked in front of a brick building

In Y 1947, Ferrari launched the 125S. And since the non-compete agreement with Alfa had lapsed, this was the 1st car to carry the Ferrari name, establishing the company we know it today, as Enzo became the man he wanted to be.

a red car

In the late 1940’s, Luigi Chinetti, a successful Italian-born racing driver and a naturalized American citizen, approached Ferrari about the prospect of building sports cars for the public.

Ferrari was hesitant because his company’s main purpose was to win races. At that point, the only cars Ferrari sold were for privateers. Mr. Chinetti started racing and winning driving Ferrari’s cars, Enzo took notice.

By the early 1950’s, Luigi Chinetti got the sports cars he wanted and opened the 1st Ferrari dealership in NYC.

a red car parked on the side of a building

The US became a huge market for Ferrari’s sports racing cars. This opened the doors for Ferrari’s business, and its cars became the stuff of legend.

… the GTO and …

a red car parked on the side of a road

… the Testa Rossa soon appeared.

a red motorcycle parked in front of a crowd

By the 1960’s, Ferrari’s cars demonstrated their prowess on and off the track.

In Y 1963, Ford CEO Henry Ford II jumped at the opportunity to buy Ferrari’s road-car business. The deal failed after Enzo found out that Ferrari would have to ask Ford for money from Detroit to go racing.

Upset by his failure to close the deal, CEO Ford decided to build his own car to beat Enzo’s team at the 24 Hours of LeMans.

Ferrari ruled Le Mans then. Enzo and his team had dominated the grueling 24-hour endurance car race, winning 6X running from Y’s 1960 to 1965.

By Y 1966, Ford’s challenger for Ferrari’s cars was ready. The legendary GT40 was set to race at Le Mans.

a car parked in a parking lot

Henry Ford II got his revenge. The GT40 won Le Mans with a stunning 1-2-3 finish, ending Ferrari’s dominance.

Ford would go on to win 4 years in a row, from Y’s 1966 until 1969.

By Y 1969, Enzo knew his company needed additional resources to be successful and survive. That year, Ferrari sold 50% of the business to the company that once refused to give him a job to Fiat

Enzo Ferrari died in Y 1988 at 90 anni. But before his passing, he signed off on 1 final car to commemorate the 40th anniversary of his company.

The F40

a red car

After the passing of Enzo Ferrari, longtime executive Luca di Montezemolo assumed the position of President and later Chairman. Under his Luca guidance, Ferrari was transformed into a global luxury brand during the 1990’s and the 2000’s.

Today, the company sells its Supercars for hundreds of thousands of dollars, and it Hyper Supercars and Limited Editions for millions.

a black and red car on display

Its Hyper Supercars

a red motorcycle parked on the side of a road

Ferrari also licenses it’s mark for everything from luxury clothing to jewelry.

There are even 2 Ferrari-themed amusement parks.

a group of people standing in a train station

On the racing front

Ferrari is 1 of the best in Motorsports. The company’s F1 team has won 8 world championships between Y’s 1999 and 2008.

With its IPO, Ferrari has completed its transformation from a startup racing company to a multibillion-dollar global luxury brand. Ferrari trades on the NYSE and Milan Bourse under the ticker RACE.

Ferrari is the Aristocrat of the automotive sector.

The 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 Bullish to Very Bullish, there is extremely light resistance now at 142.61, and strong support at 135.85, all of our Key indicators are Very Bullish in here.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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