Can a Ferrari Investment Lead to a Ferrari One Day?
What attracted me to review Ferrari?
The stock's recent drop in price.
Since hitting a $31.66 low in February 2016 the Ferrari stock has been on a tear upwards. The stock touched a high of $118.10 and two days later closed at $109.36. The rapid drop got my attention. On Thursday 9/17/17 the stock opened under its 10 and 20 period moving averages. I wanted to know if Ferrari is undervalued, overvalued, or fairly valued. Could an investment here payoff in the future with enough profit to buy a Ferrari?
Is there any value in Ferrari?
Ferrari's P/S, P/CF, P/B are above the industry and sector averages.The company's P/E is slightly lower than the sector average. Based on these numbers there is no value in Ferrari.
Ferrari's Return on Assets and Return on Equity are higher than the industry and sector averages.
(Revenue data provide by E-Trade)
Ferrari's revenue growth from 2013 - 2016 has been great, and revenue is expected to increase in 2017. The company reported Q2 revenue of €920M, a 13.5% year-over-year increase. The business model of limited supply and exclusivity works for Ferrari.
According to Bloomberg, there is speculation that Ferrari plans to enter the sports utility vehicle market. Does the company's management have the knowledge and understanding of the luxury S.U.V. market? If not this could slow the great revenue growth the company has experienced over the past few years.
Recent Warnings, Upgrades, or Downgrades
On 9/7/17 Morgan Stanley downgraded Ferrari with a price target of $100. Morgan Stanley cites increased competition from other supercar manufacturers Aston Martin, Lamborghini, and McLaren. Morgan Stanley also notes a potential Aston Martin I.P.O. could attract Ferrari investors.
On 8/3/17 UBS raised its price target on Ferrari from $100 to $125.
The Seville Report Grade
We found some good in Ferrari during our review. The revenue growth mentioned earlier. Also the company's net income has increased in 2015 and 2016. The company's Return on Equity and Return on Assets compared to the sector and industry averages were good as well, and the company is now paying dividends to its shareholders. Another plus for the company was its ability to generate free cash flow. However, Ferrari graded out at a D. Our review suggest that Ferrari's stock at $109 is overvalued.
I like what I reviewed on Ferrari. The numbers, the margins, the cash flow, and the growth story all seemed solid. However $109 doesn't seem to be the safest price to buy the stock.
So the answer is, No! A Ferrari investment right now will not end with me buying a Ferrari.
I have no business relationship with any company whose stock is mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.
Just in case you prefer the numbers over the charts, below are the numbers used to produce the charts used above.