Ferrari (NYSE:RACE) to capitalise on brand as it promises to deliver faster growth
Strong sales of Ferrari’s Portofino and 812 Superfast models enabled the Italian luxury carmaker to raise its outlook Monday, with a new brand strategy promising even more growth.
Ferrari’s Milan-listed shares rose as much as 7.4% to an all-time high of EUR 155.15 after it reported “solid” 3rd Quarter results and signalled a strong year ahead.
The ‘Cavallino Rampante’ launched a plan to enhance its brand through new apparel and accessory collections, entertainment offers, plus luxury products and services for clienti. They include an agreement with Italian fashion house Giorgio Armani and the opening of a restaurant with Star Chef Massimo Bottura in the group’s hometown of Maranello in Northern Italy.
Ferrari expects the new brand initiative to represent around 10% of the group’s profitability in the next 7 to 10 years, in what Chief Executive Louis Camilleri described as an “ambitious but realistic target”.
“It is our intention to increase the size of the cake and our share of the cake,” he told analysts in an earnings call, referring to the group’s bid to expand revenues outside of selling Supercars.
The new branding strategy builds on the group’s aggressive roll-out of new premium models.
Ferrari said core earnings would be around $1.42-B for the full year, topping a previous forecast.
Mr. Camilleri said that this year Ferrari would match what it forecast last year for Y 2020. “I think it’s rather premature for us to address 2020 at this time. But clearly, we do anticipate a strong year,” he told analysts on the call.
The iconic Italian Supercar maker also increased its outlook on Y 2019 revenues to about 3.7-B euros, from a previous forecast of more than 3.5-B euros, and industrial free cash flow.
“We expect the stock to rise but (the) focus will be on 2020,” Morgan Stanley said in a note, adding that Ferrari’s results were better than expected across the board.
Ferrari will present its latest new model in Rome next week, taking the total to 5 this year, including the F90 Stradale, its 1st hybrid car in series-production.
To support Ferrari’s growth and profitability Mr. Camilleri’s strategy plan from September last year promised to launch 15 new models between Ys 2019 and 2022.
Ferrari, known for its racing pedigree and roaring combustion engines, is also considering a full-electric model, though that will not hit the road before Y 2023.
“We are taking our time to ensure that it will be a true Ferrari DNA car,” Mr. Camilleri said.
In the July-September frame, Ferrari’s adjusted EBITDA rose 11% to 311-M euros. Margins on core earnings rose by 70 basis points year on year to 33.9%, close to Ferrari’s 34% target for the full-year.
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 Bullish, overhead resistance is None at and support at 169.86 as 3 of our 3 Key indicators have turned Very Bullish and the stock has established long term support ahead of this breakout.
Ferrari finished at 169.94, +8.56 Monday 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.