“Ferrari’s stock may prove more reliable than the Italian automaker’s notoriously fickle supercars,” Yahoo Finance declares. Talk about setting a low bar! Yahoo bases its tongue-in-cheek analysis on Morgan Stanley auto analyst Adam Jonas’ read on Ferrari stock price. Jonas’ loves him some Ferrari stock.
“Ferrari is as close to recession proof as it gets in our coverage,” Mr. Jonas pronounced on Wednesday. Wait. Does that mean we’re in a recession? Somebody tell the President! Meanwhile . . .
What’s up with “may prove to be” and “as close as it gets”? These guys should be working at Waffle House. Hello? Should we buy Ferrari stock at its current price or not? A lot of people are voting with their feet.
The stock has dropped nearly 27% year to date as investors fear plunging stock and crypto markets could weigh on sales at the supercar maker.
The recent Ferrari stock price descent, on top of the not-entirely-reassuring one-year trend, isn’t sending a tingle down investors’ collective leg.
Surprisingly, Morgan Stanley’s man isn’t heartened by the recent arrival of the prancing horse cavalry in the shape of a $400k SUV. Mr. Jonas doesn’t see the Purosangue doing a Cayenne, transforming the venerable Italian sports car concern into a hugely profitable truck maker.
We do not in any way expect Purosangue to be more of a sizeable niche model within the Ferrari line-up. Ferrari has stated that Purosangue sales will, on average, contribute less than 20% of shipments over its lifetime. We would take the under on 15% of total Ferrari sales at this stage, not due to demand but more related to supply.
Mr. Jonas is missing the Ferrari forest from the Purosangue trees. As we revealed in Three Ways to Get On Ferrari’s Blacklist, Maranello made more money selling fewer cars in 2021 than in 2020 or 2019. Simple logic tells us Ferrari needs to make less Purosangues to make more money!
While Mr. Jonas isn’t bullish on the Purosangue in the short term – put off no doubt by supply issues caused by the Ukrainian war and post-pandemic pandemonium – he sees the Purosangue as one giant leap for future profits.
We view Purosangue as a valuable “proof-of-concept” when assessing demand for ultra luxury SUVs which Ferrari can further develop in full-electric/BEV [battery electric vehicle] form later in the decade where we think the segment will lend itself to an even higher performance and higher margin Ferrari vehicle.
I’m not sure why anyone would want a SUV that’s faster from 0 – 60 mph than 3.3 seconds, but Mr. Jonas is not wrong about the possibility of a “higher performance” Purosangue. The Ferrari SF90’s hybrid power plants plural generate 986 hp, as compared to the Purosangue V12’s paltry 725 hp.
As for generating higher margins, holy one-year waiting list Batman! Ferrari is already delivering an adjusted EBITDA margin of 35% on its vehicles – the highest in the biz by a long chalk. Are we waiting for Ferrari to report higher margins than my coke dealer?
Bottom line:
“Ferrari trades at a justified premium to luxury brands, but at a discount to luxury leader, Hermes, albeit with more opportunity to grow organically via: new customers, new segments and geographically in China and Asia-Pacific, as well as exhibiting a unique moat with a world renowned brand and a 12+ month customer order book.”
When it comes to the stock market (and online dating), perception is reality. If investors think the recession will ding if not crater Ferrari’s current and future order book, they won’t value the stock highly. If they’re wrong, which they are, there’s only one word for it. BUY!
