Ferrari (NYSE:RACE) the Aristocrat of the Automotive Sector, ‘Buy on the Dip’

Ferrari (NYSE:RACE) the Aristocrat of the Automotive Sector, ‘Buy on the Dip’


Ferrari (NYSE:RACE) shares dropped 6% to the bottom of the FTSE MIB index, with investors booking profits after the Supercar maker unveiled 2 new cars Monday at Frankfurt, the stock is up 59% YTD.

With a market capitalization of $37-B, Ferrari (NYSE:RACE) is similarly sized to Ford but about 50% the size of GM, and it is growing at a healthy pace and pays a dividend.

In Q-2, Ferrari reported total shipments growing 8.4% Y-Y to 2,671 units. Revenue rose 6.8%, adjusted EBITDA was up 8.7% to $346-B and the EBITDA margin was 32%. The company benefited from an increase in V8 models shipped, offset by a drop in V12 models falling by a few units. Geographically, sales to China rose due to a decision to speed up client deliveries ahead of new emission regulations.

Ferrari confirmed its guidance will approach the high end of the range on all metrics.  Volume increase for the 488 Pista and 488 Pista Spider, Portofino, the 812 Superfast and now 2 spiders , the 812 GTS and the F8 Spider are driving demand for cars and spare parts. Higher sponsorship levels from F1 racing activities is likely contributing favorably to the F-Y results.

The iconic Italian luxury super car maker has a $1.65-B multi-year share buyback program and will buy back $220.1-M in 2-H of Y 2019. In the 1st half of the year, it bought back $165.5-M worth of shares.

RACE stock is the most expensive stock in the setor, with a P/E of 34X as it is seen valued as a luxury manufacturer whose demand outstrips supply, and it has earned that valuation. Its clientele is buying more units, driving revenue higher.

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 Neutral to Bearish, overhead resistance is at 159.59 and support at 150.05 all Key indicators are flashing Bearish in here. Ferrari finished at 150.99, -9.75 Tuesday in NY.

Note: Goldman Sachs upgraded Ferrari to ‘buy‘ from ‘neutral ‘calling the stock’s pullback a good “entry point.” “We upgrade Ferrari from Neutral to Buy, offering 15% upside to our new price targets of 182. Our thesis, outlined in Life of Luxury published last month, is fundamentally unchanged post Ferrari’s in-line 2-Q results. We view the stock’s recent pullback (9.5% since July 16) as a good entry point in here.

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

Stay tuned…

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