Our post Porsche IPO Be Damned! Is Now a Good Time to Buy Ferrari Stock? received some attention from a finance guy I’ll call Manuel. He took issue with my BUY advice. Well, kinda. Before I present his analysis, a quick disclaimer . . .
“I am not a licensed financial advisor, investors should do their own due diligence before investing in any asset and do so at their own risk.” Grazie, Manuel! Here’s his breakdown.
Ferrari N.V. (RACE)
Current Value: $195
Fair Market Value: $169
The stock’s dividend yield is less than one percent, making it a growth stock. In a bear market, growth stocks are usually hammered worse than higher dividends stocks.
Ferrari stock institutional ownership: 34%
Ferrari stock retail ownership: 66%
The high percentage of retail ownership indicates high volatility. On the other side of that, Ferrari stock’s price-to-earnings ratio is double the industry average.
Analysis Opinion / Fundamental Analysis
Seventy-one percent of Wall Street analysts are bullish on Ferrari stock. (I’m unsure of their time horizon. I assume it’s five years plus). Ferrari’s market cap is large.
In terms of risk, Ferrari’s size makes it one of those “too big to fail” kind of deals. Besides, the Ferrari brand is strong like bull (more so than Lamborghini’s bull).
Financial Health 9.8/10
Growth stability 3.6/10
Quality 7.2/10
Valuation 5.8/10 (meaning it’s valued right around the fair market value)
Market Sentiment
2 – 6 weeks – weak
6 – 9 months – weak
9 mos. – 2 year – strong
My option
Wall Street is enamored by Ferrari’s new Pursangue. The SUV is more expensive than their other models ($400k+). The new vehicle will help increase Ferrari’s already sky-high margins. But . . .
Ferrari isn’t planning on significantly increasing volume. While current and future profits are high, the stock market rewards growth. The more, the better. That is not the Ferrari way – part of which makes Ferrari stock a good long-term investment.
One-year outlook – Bear
Two-year outlook – Bear
Five-year outlook – Bull
10-year outlook – Bull
