Ferrari Shrugs Off Coronavirus: Electric Cars, SUVs Could Transform Future.
“In many ways 2020 earnings do not matter, only the magnitude of the rebound in 2021”
Some investors think Italian luxury sports-car maker Ferrari might be losing its allure, while others see long-term sales bounding ahead as it rides the electric car wave and embraces SUVs.
Investment researcher Jefferies was impressed with the way Ferrari had kept ahead of the coronavirus which has devastated the bottom lines of lesser mortals, but it trimmed its forecast for 2020 EBIT (earnings before interest and tax) profit forecast slightly while retaining its “Underperform) rating on the shares.
Ferrari’s earnings before interest, tax, depreciation and amortisation (EBITDA) took a 60% hit in the second quarter to 124 million euros ($146 million). For all of 2020, Ferrari still expects EBITDA of between 1.075 to 1.125 billion euros ($1.27 billion) compared with previous guidance of between 1.05 billion euros and 1.2 billion ($1.4 billion).
Ferrari, which is controlled by Italy’s Agnelli family through Exor, reported EBITDA profits of 1.27 billion euros ($1.4 billion) in 2019.
“In many ways 2020 earnings do not matter, only the magnitude of the rebound in 2021,” said Jefferies analyst Philippe Houchois.
Houchois said 2022 estimates suggest a return to average rather than expansion priced in shares, while capital spending will remain elevated for several years because of the transition to new technology.
But investment bank Morgan Stanley sees only sunlit uplands.
Higher phase of growth
“We think Ferrari is entering a higher phase of growth and a tech transition that takes investor thinking beyond the limits of luxury goods comps… and can grow the super-luxury pie much faster (and more sustainable) than the market expects,” Morgan Stanley analyst Adam Jonas said in a report.
Morgan Stanley expects Ferrari sales to double by 2030 to over 20,000, and double again by 2040 to 40,000. Morgan Stanley rates Ferrari “Overweight”.
In 2019, Ferrari sold 10,131 vehicles, up 9.5% on the previous year, boosted by sales of the Portofino and 812 Superfast. It launched its first plug-in hybrid, the SF90 Stradale. Ferrari new models in 2020 include the Roma, which slots into the line-up as a new V8 powered, fixed roof Berlinetta – a front-engined coupe sitting below the mid-engined F8Tributo but above the convertible Portofino.
Morgan Stanley expects Ferrari to make 1,500 Purosangue SUVs by 2025 and add 200 million euros ($236 million) or 7.5% to EBITDA. Electric vehicles will play an increasingly important role, going from 0% to 3% of sales by 2025, but jumping to 20% in 2030 and 50% in 2040.
Electric cars will transform the brand.
“We expect a move to EVs will be an inflection point for the company as it will require material investments in the short term, but it is our view it will pay off from a ROIC (return on invested capital) perspective and that Ferrari will be able to earn higher margins, while appealing to an even wider customer base and bringing in new generations to the brand,” Jonas said.
Ferrari shares rose 1.76% Wednesday to 161.80 euros. They peaked in late February at 167.10 before plunging to about 116 in March, but have rallied steadily since then.