Ferrari (NYSE:RACE) has a history of strong earnings beats and the stock has blown away the competition.
Now, investors are now looking for another successful Quarterly report from Ferrari that is due out before the market opens Friday, 2 August. The stock is +9.4% YTD.
Ferrari is The Aristocrat, most respected and storied auto manufacturers in the world, with a history stretching back to its 1st car s/n125S built in Y 1947.
In Y 1969, Fiat bought a 50% stake in the company, later expanding to 90% ownership in Y 1988. Then, when Fiat and Chrysler merged in Y 2014 to create FCA (NYSE:FCAU), Ferrari was spun off with an IPO in October 2015 that saw shares transferred to FCA shareholders.
While the company is a small manufacturer, producing just over 9,000 cars last year, compared to Ford’s (NYSE:F) 878,000, it vehicles are cars are known for their extremely high-end performance and luxury. Even though 9,000 cars may seem like an small number, Ferrari’s Y 2018 production volume was up 10.2% over Y 2017.
No currently-produced Ferrari model has a starting price below $200,000, and some models start as high as $1.4-M +. Because of the high prices and exclusivity, Ferrari makes an estimated $80,000 in profit from each car sold.
Ferrari also has a stellar earnings history.
The luxury automaker has posted Y-Y Quarterly EPS growth every Quarter since Y 2015, often by 30% or more. Revenues have not increased by as much and have held at around $1-B per Quarter since Y 2017, posting $1.068 billion last quarter.
Ferrari’s brand is established in the world of performance cars, motorsport, and beyond. It has been rated as the world’s most powerful brand, as people everywhere recognize its distinctive horse logo and associate it with performance and luxury.
This is extremely important to Ferrari’s future as it faces more and more competitors.
The draw of a Ferrari, as solidified and defined by its brand, is tied to status, emotion, and legacy. This intangible asset should assure investors that the storied manufacturer will be able to weather the storm of electric performance vehicles and last a long time.
The Consensus Estimates call for adjusted Q-2 EPS of $1.03, for a 3% increase over a year prior. Revenue for this Quarter is projected to stay roughly even with just a 0.47% drop to $1.08-B. This means sales are steady and production/development costs have fallen slightly.
For FY 2019, estimates predict revenue will jump 4.95%, while earnings climb 2.74%.
Looking further ahead, estimates for FY 2020 appear very promising, with revenue predicted to jump 7.84% above Y 2019. Earnings are projected to grow by 8.47%.
It is hard to tell what is driving this projected growth, as Ferrari makes money from its many brand partnerships and racing endeavors.
One of the side-effects of having such a powerful and recognizable brand is the overvaluation that comes with.
Since Ferrari went public in Y 2015, its forward PER has moved up to very high levels. It is currently trading at 38X, compared to a much lower auto industry average of 9.39X.
However, Ferrari has shown some staying power at this extremely high valuation, meaning it may not end up being a concern for investors.
Ferrari has see 4 estimate revisions for the current Quarter more in a positive direction in the past 60 days. The Maranello Outfit’s stock has a history of consistent and impressive earnings growth, so investors should look for this to continue in the earnings report.
At the same time, the stock is overvalued relative to the automotive market, but not relative to the luxury brand market.
If you are willing to pay the luxury premium, this iconic Italian super and hypersuper car maker will likely continue to stay at the leading edge of high-performance, high-luxury products for many years to come.
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 Bullish, overhead resistance is at 164.07, and support at 158.71, all Key indicators are flashing Bearish in here. Ferrari finished at 161.08, +0.94 Wednesday in NY.
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.
The final race before the mid-season break is this weekend, with the F1 circus moving to the Hungarian Grand Prix, tune in.
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