The Reason Ferrari (NYSE:RACE) is Worth More Than the Major Automakers

The Reason Ferrari (NYSE:RACE) is Worth More Than the Major Automakers

$RACE

Iconic Italian Supercar maker Ferrari’s (NYSE:RACE)market value soared to $30-B in May, surpassing market values of the larger automakers, such as Detroit’s General Motors (NYSE:GM), Ford (NYSE:F), and its former parent, Fiat-Chrysler (NYSE:FCAU).

At a time when economies and societies around the world have been thrown into chaos over the outbreak of C-19 coronavirus, investors find the high-end luxury sports car maker a good bet.

The company has big margins around 24%, a strong racing heritage and a brand admired around the world. 

Its market capitalization is roughly 3X the $12-B value that Ferrari’s late former Chairman/CEO Sergio Marchionne estimated the company was worth prior to its IPO. At the time, some analysts thought the company was worth about 50% of Mr. Marchionne’s estimate. 

When Ferrari went public in October of Y 2015, it had a market value of $9.8-B. Ferrari finalized the spin-off from FCA in early Y 2016. 

Mr. Marchionne believed Ferrari’s value would be driven by its golden brand. Selling cars, he said, was “almost incidental” to Ferrari’s value.

The company has long marked its brand on merchandise, such as clothing and watches. It even has its own theme parks in Abu Dhabi and Spain.

But leveraging the brand to sell fashion or other goods is risky, Ferrari has acknowledged. But Ferrari will not brand low level merch to sell in any of its 22 stores worldwide.

Analysts who follow the company say it takes a disciplined approach to merchandising, and choosing partners and products carefully.

For example, Ferrari formed a partnership with high-end Italian clothier Giorgio Armani in Y 2019 who is designing a complete Ferrari line and took an equity position in the company, Giorgio Armani has no heirs.

Deals like that allow Ferrari to leverage its brand while maintaining its prestige and staying to its luxury Italian heritage.

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 overall Bullish with a Very Bullish bias, the Key resistance 175.36, and Key support is at 161.91.

Our overall technical outlook is Bullish in here, as all Key indicators are Bullish to Very Bullish as it approaches its all time highs at 179.21 marked on 18 February 2020.

Ferrari (NYSE:RACE) finished Thursday at 165.39, -10.29 in NY.

The Maranello Outfit’s shares were raised to Buy from Hold at HSBC.

Ferrari will continue to create value in the long term. Ferrari is a quality 1st long term luxury products investment, and I have called it at it at 200+/share long term, adjusting it to 200/share short term (after the virus) and siding with BAML to 230 long term for now. The stock is now considered defensive in the sector.

Have a healthy weekend, Keep the Faith!

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Paul Ebeling

Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he it the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.