Ferrari (NYSE:RACE) Stock is as Sexy a its Cars

Ferrari (NYSE:RACE) Stock is as Sexy a its Cars


Many investors may not realize that the iconic Italian sports car brand is publicly traded.

Ferrari (NYSE:RACE) is a best-of-breed Aristocrat company in a very competitive industry. It was spun off from Fiat Chrysler in October 2015 and has seen sales and profits steadily march higher over the last 4 years. 

The stock is not cheap, so some investors may want to keep it on a watch list before buying. The current valuation is a about 37X earnings. As that valuation suggests, Ferrari has more in common with a typical growth stock than a slow-growing car company.

The 1st thing that comes out is that Ferrari is really a luxury goods brand. The company selectively licenses the brand for luxury goods to reach a wider and younger audience. And recently inked a design/marketing deal with Armani.

Ferrari has branded theme parks, which generate a significant amount of its licensing revenue. Last year, Ferrari brought in $506-M from these licensing activities. 

Ferrari generates about 75% of its revenue from selling cars. The company has had more consistent sales growth than other luxury car makers primarily because of its brand power and low-volume strategy. 

In Y 2018, Ferrari shipped only 9,251 cars, but generated $2.5-B from these shipments. Doing the math reveals that the average selling price for one of these Supercars was $274,000. 

Ferrari generates an extremely high operating margin for a car manufacturer of 33% on an EBITDA basis. For perspective, Tesla’s EBITDA margin was 13.8% in Q-3

Management continues to push Ferrari’s pricing power, expand the car lineup, and reduce the licensing categories it’s involved in to maintain its brand strength and improve margins. 

Management is currently calling for revenue to approach $5-B by Y 2022, and for adjusted free cash flow to roughly 3X to about $1.1-B – 1.25-B. 

Ferrari is a super brand and a well-run business that does not get a lot of attention compared to other car companies. Buying shares on any pullback in the stock price seems like a good idea.

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 Very Bullish, overhead resistance is 168.46, and Key support at 168.42, as all Key indicators are Bullish and the stock has established long term support ahead of this breakout.

Ferrari finished at 166.17, -0.77 Friday in NY.

Ferrari will continue to create value in the long term. Ferrari is a quality 1st long term luxury products investment, and I see it at 200+/share in that frame.

Ferrari will continue to create value in the long term. Ferrari is a quality 1st long term luxury products investment, and I see it at 200+/share in that frame.

Have a terrific weekend.

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