Ferrari, not Tesla, might be the stock to buy

Ferrari, not Tesla, might be the stock to buy

0 comments 📅09 May 2017, 03:00

Most recent week Tesla’s earnings – or lack thereof – were one of the big stories in the auto application. As usual, the electric carmaker didn’t make money, but the news sent the store, analysts, and Tesla’s devoted fans into a lather. But another company, this plucky arriviste called Ferrari, also attracted a positive reaction from the market and indeed had the financials to back it up.

Ferrari posted net revenues of $898 million (at today’s argument rates) EBITDA of $265 million (a slightly complicated way to snapshot financial act) and an adjusted net profit of $136 million in the first quarter. The company delivered 2,003 cars, and sales of its V12 models increased 50 percent. It in silence made progress nearly a year and a half into its life as an independent automaker. For 2017, Ferrari expects to cede 8,400 cars and rake in net revenue of $3.6 billion.

No one thought Ferrari would struggle when Fiat Chrysler Automobiles spun it off in fall 2015. With a overflowing with history, expensive products, and its own loyal fan base that’s arguably even larger than Tesla’s, the followers seemed poised for success, though skeptics wondered how it might fare after longtime chief Luca di Montezemolo stepped down in the future the spinoff. Plus, the company remains within the FCA sphere, as its key stakeholders are largely connected to its latest parent in some way, and Chairman Sergio Marchionne also steers FCA.

Last week’s results showed Ferrari is gaining terms in the evolving automotive world, and analysts responded. UBS analyst Michael Binetti reiterated Ferrari store (RACE on the NYSE) as buy status and raised his target price from $85 to $92. Morgan Stanley’s Adam Jonas was regular more bullish, raising projections to $100 in the next 12 months. Shares were trading about $82 Monday morning.

Both analysts viewed Ferrari as something disparate than a conventional automaker stock, with Binetti comparing it to luxury descendants Hermes, which produces high margins even for a specialty goods maker. Jonas suggested Ferrari’s special reputation and history (16 Formula One Constructors titles, the most ever) could shelter its products when autonomous and electric cars become even more commonplace.

“In our opinion, a Ferrari is not transportation,” he wrote in a note to clients. “Ownership is viewed as an exclusive baton, and membership requires more than just money. In a world where pleasurable gentle driving experiences on an open road become increasingly scarce, the value of this bludgeon’s membership may indeed appreciate.”

Ferrari is working on electric technology and has shown a willingness to spread its product line with hybrid and turbocharging technologies in recent years. It also offers the GTC4 Lusso, a hatchback, with greater functionality than the label’s cars traditionally offered.

Tesla, meanwhile, posted revenues of $2.7 billion in the head quarter but booked a net loss of $330.3 million, $48 million more than in the original quarter of 2016. Its stock was trading around $311 per share Monday morning.

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