Company Reports

We find the long-term stability of Ferrari's revenue, addressable market growth, expansive profit margin, and solid returns on invested capital throughout economic cycles to be compelling reasons to invest at the right price. Because of its exclusive clientele of high-net-worth individuals, we believe the company will show resiliency during periods of economic uncertainty; such was the case with the pandemic in 2020. While we are not entirely averse to paying up for stocks that possess a wide economic moat and stable economic profits through business cycles, we think Ferrari shares will regularly trade at rich, luxury goods valuation multiples.

Wide-moat-rated Ferrari posted fourth-quarter diluted earnings per share of EUR 1.62, beating the EUR 1.48 FactSet consensus by EUR 0.14 and up EUR 0.41 from the prior year. Fourth-quarter record consolidated revenue of EUR 1.523 billion increased 11%, as cars and spare parts revenue rose 11%, while sponsorship, commercial, brand, and other revenue increased 22%. Engine revenue increased 7% as final shipments to Maserati were made on contract expiration at year-end. The strength of Ferrari’s wide moat and pricing power was on display as the 11% revenue increase substantially outpaced the 2% decline in volume. Excluding foreign currency translation, revenue improved 12% over the prior year.

We find the long-term stability of Ferrari's revenue, addressable market growth, expansive profit margin, and solid returns on invested capital throughout economic cycles to be compelling reasons to invest at the right price. Because of its exclusive clientele of high-net-worth individuals, we believe the company will show resiliency during periods of economic uncertainty; such was the case with the coronavirus pandemic in 2020. While we are not entirely averse to paying up for stocks that possess a wide economic moat and stable economic profits through business cycles, we think Ferrari shares will regularly trade at rich, luxury goods valuation multiples.

Wide-moat-rated Ferrari posted third-quarter diluted earnings per share of EUR 1.82, beating the EUR 1.61 FactSet consensus by EUR 0.21 and up EUR 0.59 from the prior year. Third-quarter record consolidated revenue of EUR 1.544 billion (beat consensus by 5%) increased 24%, driven mostly by a 27% increase in cars and spare parts revenue, a 14% increase in sponsorship, partially offset by a 33% decline in engine revenue on reduced shipments to Maserati as contract expiration is this year. The sales increase was supported by a richer mix, increased personalizations, and a 9% volume increase. Excluding foreign currency translation, revenue improved 26% over the prior year.

We find the long-term stability of Ferrari's revenue, addressable market growth, expansive profit margin, and solid returns on invested capital throughout economic cycles to be compelling reasons to invest at the right price. Because of its exclusive clientele of high-net-worth individuals, we believe the company will show resiliency during periods of economic uncertainty; such was the case with the coronavirus pandemic in 2020. While we are not entirely averse to paying up for stocks that possess a wide economic moat and stable economic profits through business cycles, we think Ferrari shares will regularly trade at rich, luxury goods valuation multiples.

Wide-moat-rated Ferrari posted second-quarter diluted earnings per share of EUR 1.83, beating the EUR 1.73 FactSet consensus by EUR 0.10 and up EUR 0.47 from the prior year. Consolidated revenue of EUR 1.474 billion (flat with consensus) increased 14%, driven mostly by a 26% increase in sponsorship and a 15% increase in cars and spare-parts revenue, partially offset by a 34% decline in engine revenue on reduced shipments to Maserati as the contract expiration is this year. The sales increase was supported by a richer mix and increased personalization, despite a 2% dip in shipments on quarterly regional and mix volume allocation. Excluding foreign-currency translation, revenue improved 13% over the prior year.

We find the long-term stability of Ferrari's revenue, addressable market growth, expansive profit margin, and solid returns on invested capital throughout economic cycles to be compelling reasons to invest at the right price. Because of its exclusive clientele of high-net-worth individuals, we believe the company will show resiliency during periods of economic uncertainty; such was the case with the coronavirus pandemic in 2020. While we are not entirely averse to paying up for stocks that possess a wide economic moat and stable economic profits through business cycles, we think Ferrari shares will regularly trade at rich, luxury goods valuation multiples.

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.

We find the long-term stability of Ferrari's revenue, addressable market growth, expansive profit margin, and solid returns on invested capital throughout economic cycles to be compelling reasons to invest at the right price. Because of its exclusive clientele of high-net-worth individuals, we believe the company will show resiliency during periods of economic uncertainty; such was the case with the coronavirus pandemic in 2020. While we are not entirely averse to paying up for stocks that possess a wide economic moat and stable economic profits through business cycles, we think Ferrari shares will regularly trade at rich, luxury goods valuation multiples.

We find the long-term stability of Ferrari's revenue, addressable market growth, expansive profit margin, and solid returns on invested capital throughout economic cycles to be compelling reasons to invest at the right price. Because of its exclusive clientele of high-net-worth individuals, we believe the company will show resiliency during periods of economic uncertainty; such was the case with the coronavirus pandemic in 2020. While we are not entirely averse to paying up for stocks that possess a wide economic moat and stable economic profits through business cycles, we think Ferrari shares will regularly trade at rich, luxury goods valuation multiples.

Wide-moat-rated Ferrari posted first-quarter diluted earnings per share of EUR 1.62, a 26% increase over the prior year and EUR 0.14 above FactSet sell-side consensus. First-quarter consolidated revenue of EUR 1.429 billion (also beat consensus by 4%) increased 20%, driven by 23% growth in cars and spare parts revenue. Sales benefited from strong shipment growth and favorable pricing gains, partially offset by a 12% decline in engine revenue on reduced volume shipments to Maserati as contract expiration is this year. Excluding foreign currency translation, revenue improved 18% over the prior year.

We find the long-term stability of Ferrari's revenue, addressable market growth, expansive profit margin, and solid returns on invested capital throughout economic cycles to be compelling reasons to invest at the right price. Because of its exclusive clientele of high-net-worth individuals, we believe the company will show resiliency during periods of economic uncertainty; such was the case with the coronavirus pandemic in 2020. While we are not entirely averse to paying up for stocks that possess a wide economic moat and stable economic profits through business cycles, we think Ferrari shares will regularly trade at rich, luxury goods valuation multiples.

Wide-moat-rated Ferrari reported record fourth-quarter diluted earnings per share of EUR 1.21, EUR 0.05 better than a year ago but EUR 0.09 shy of the EUR 1.30 FactSet sell-side consensus. Record fourth-quarter revenue of EUR 1.368 billion (also beat consensus by 5%) was 17% higher than last year as cars and spare parts increased 23% but sponsorship revenue decreased 15%. Increased revenue was due to higher volume and favorable currency, partially offset by an 18% decline in engine revenue on reduced shipments to Maserati, whose supply agreement ends in 2023. Excluding favorable currency translation, organic revenue was up 12% compared with the year-ago period.

We find the long-term stability of Ferrari's revenue, addressable market growth, expansive profit margin, and solid returns on invested capital throughout economic cycles to be compelling reasons to invest at the right price. Because of its exclusive clientele of high-net-worth individuals, we believe the company will show resiliency during periods of economic uncertainty; such was the case with the coronavirus pandemic in 2020. While we are not entirely averse to paying up for stocks that possess a wide economic moat and stable economic profits through business cycles, we think Ferrari shares will regularly trade at rich, luxury goods valuation multiples.

Wide-moat-rated Ferrari reported record third-quarter diluted earnings per share of EUR 1.23, EUR 0.12 better than a year ago and EUR 0.06 above the EUR 1.17 FactSet sell-side consensus. Record third-quarter revenue of EUR 1,250 million (also beat consensus by 5%) was 19% higher than last year as cars and spare parts and sponsorship revenue increased 20% and 29%, respectively. Increased revenue was due to higher volume and favorable currency, partially offset by a 25% decline in engine revenue on reduced shipments to Maserati whose supply agreement ends in 2023.

We find the long-term stability of Ferrari's revenue, addressable market growth, expansive profit margin, and solid returns on invested capital throughout economic cycles to be compelling reasons to invest at the right price. Because of its exclusive clientele of high-net-worth individuals, we believe the company will show resiliency during periods of economic uncertainty; such was the case with the coronavirus pandemic in 2020. While we are not entirely averse to paying up for stocks that possess a wide economic moat and stable economic profits through business cycles, we think Ferrari shares will regularly trade at rich, luxury goods valuation multiples.

Wide-moat-rated Ferrari reported record second-quarter diluted earnings per share of EUR 1.36, EUR 0.18 better than a year ago and EUR 0.12 above the EUR 1.24 FactSet sell-side consensus. Record second-quarter revenue of EUR 1,291 million (beat consensus by 75 million) was 25% higher than the EUR 1,034 million reported last year as revenue from cars and spare parts and from sponsorships increased 25% and 29%, respectively. Increased revenue was due to higher volume, improved mix and pricing, favorable currency, and personalizations, partially offset by a 9% decline in engine revenue on reduced shipments to Maserati whose supply agreement ends in 2023.

We find the long-term stability of Ferrari's revenue, addressable market growth, expansive profit margin, and solid returns on invested capital throughout economic cycles to be compelling reasons to invest at the right price. Because of its exclusive clientele of high-net-worth individuals, we believe the company will show resiliency during periods of economic uncertainty; such was the case with the coronavirus pandemic in 2020. While we are not entirely averse to paying up for stocks that possess a wide economic moat and stable economic profits through business cycles, we think Ferrari shares will regularly trade at rich, luxury goods valuation multiples.

Ferrari’s wide moat was prominently displayed at its capital markets day. Management presented its 2022-26 strategic plan, in which it expects annual revenue growth of 9% to up to EUR 6.7 billion in 2026 from EUR 4.3 billion in 2021; EBITDA margin expansion to a range of 38% to 40% from 35.9% in 2021; nearly doubling cumulative industrial free cash flow to a range of EUR 4.6 billion to EUR 4.9 billion versus the 2018-22 plan at EUR 2.4 billion to EUR 2.8 billion; an increase in the dividend payout ratio to 35% from 30%; and nearly doubling the share buyback program to EUR 2.0 billion for 2022-26 compared to EUR 1.1 billion in the 2018-22 plan. The firm targets 15 product launches during the plan, including the Purosangue SUV, a full electric model, and a new supercar. By 2026, Ferrari expects its product portfolio to be 40% internal combustion and 60% hybrid and full electric.

We find the long-term stability of Ferrari's revenue, addressable market growth, expansive profit margin, and solid returns on invested capital throughout economic cycles to be compelling reasons to invest at the right price. Because of its exclusive clientele of high-net-worth individuals, we believe the company will show resiliency during periods of economic uncertainty; such was the case with the coronavirus pandemic in 2020. While we are not entirely averse to paying up for stocks that possess a wide economic moat and stable economic profits through business cycles, we think Ferrari shares will regularly trade at rich, luxury goods valuation multiples.