Ferrari: After a Fresh Look at Cost of Capital Assumption, We Raised Our Valuation 35% to EUR 256

After taking a fresh look at our weighted average aftertax cost of capital, or WACC, assumptions on wide-moat-rated Ferrari, we now believe our 9% cost of equity assumption was too conservative. Our previous assumption was based on average systematic risk, in line with the rate of return investors expect of a diversified equity portfolio. This assumption served us well in the early goings, just after Ferrari was spun off from Fiat Chrysler in October 2015 and the stock traded into as much as the 5-star range in 2016. With the exception of 2021, when the stock briefly reached 3-star territory due to the chip shortage, shares have traded in the 1-star range.