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Ferrari (RACE) Update: Floor It

We’ve posted a new note in The Grove updating our research on Ferrari. Given disclosures made by the company over the last month, we’ve upgraded our near-term earnings profile of Ferrari.  We now expect EBIT to double in the next 12 months, and surpass €1 billion by 2017, two years earlier than we had initially expected. By next year, Ferrari will have best-in-class EBIT margins, besting out LVMH, Prada, Richemont and Burberry. We’ve also included more information on the jet/helicopter interiors market, which Ferrari will be entering by 2017. We believe the company will be announcing a partnership with Finmeccanica’s AgustaWestland helicopter unit, which also happens to be our second largest position after Fiat-Ferrari. Shares are now trading below the IPO price, and represent a compelling recession-proof opportunity in the next 12 months.

We’ll be posting a publicly-available note for Fiat-Chrysler in the coming weeks. Backing out the value of the RACE shares we’ll receive on 1/4/16, FCA is trading at a 4% discount to distressed and beleaguered Volkswagen, even excluding the massive charges the company will be taking. We’ve also upgraded our earnings estimates for FCA in 2016 given stronger-than-expected results coming out of Latin America. All other regions exactly matched our estimates, which were significantly above an unintelligent consensus.

Click here to read the one pager for the Ferrari Update.

Ferrari’s Updated EBIT Margin Progression

Ferrari Margins

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Disclaimer:

This article has been distributed for informational purposes only. Neither the information nor any opinions expressed constitute a recommendation to buy or sell the securities or assets mentioned, or to invest in any investment product or strategy related to such securities or assets. It is not intended to provide personal investment advice, and it does not take into account the specific investment objectives, financial situation or particular needs of any person or entity that may receive this article. Persons reading this article should seek professional financial advice regarding the appropriateness of investing in any securities or assets discussed in this article. The author’s opinions are subject to change without notice. Forecasts, estimates, and certain information contained herein are based upon proprietary research, and the information used in such process was obtained from publicly available sources. Information contained herein has been obtained from sources believed to be reliable, but such reliability is not guaranteed. Investment accounts managed by GreenWood Investors LLC and its affiliates may have a position in the securities or assets discussed in this article. GreenWood Investors LLC may re-evaluate its holdings in such positions and sell or cover certain positions without notice. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of GreenWood Investors LLC.

Past performance is no guarantee of future results.

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