STRENGTHS
Only luxury performance vehicle manufacturer spun off from a larger parent
Niche product, hand built in Italy
Top Formula 1 racing team allowing technology/R&D transfer from racing to manufacturing.
Ability
to command a premium Price/Earnings multiple due to brand
$24B market capitalization value.
Strong macroeconomic environment.
V8 engine voted best engine of the last 20 years. “International Engine of the Year”, “Red Dot: Best
of the Best” design award for the third and fourth year running. Also sell engines to third parties such as Maserati.
Strong brand recognition
Three primary revenue generators, car sales and parts, third party engine sales, sponsorship
and ‘other’ brand related activities.
Strong management team with a depth of experience to provide continuity and support a change in leadership.
Order backlog between 12 months and three years depending on car.
WEAKNESSES
Balance
of production numbers, price and affect on brand perception as an elite product.
High Price/Earnings multiple - a contraction in the premium investors are willing to pay for the stock will affect stock price.
Self imposed limitations
on production numbers limits revenue growth to a function of unit price.
Foreign Exchange - vehicles are sold in USD but Ferrari reports in Euro’s. CEO Camalleri has stated the company will not change this structure as it would have
negative implications.
Thinly traded stock with a daily average of 750,000 shares affects stock price volatility.
Share repurchase program and dividend
Aspirational - CEO Camalleri characterized the target of €2B profit by 2022
as ‘aspirational’. A failure to address the corporate plan to achieve this will affect analyst estimates, the growth rate and the stock price.
OPPORTUNITIES
Electric Vehicles - a Ferrari is a Ferrari for reason, but
the company acknowledges the trend and entry into the EV market could open an additional revenue stream.
New leadership could bring improvements to efficiencies
Wealth growth in markets such as China, Hong Kong, Taiwan which
account for only 7% of sales but is growing at a double digit rate (26.4% Q2 2018 over Q2 2017).
Capital Markets Day Sept 17/18: Ferrari presented it’s plans to achieve management goals.
THREATS
Aston Martin has
announced an IPO. This will potentially draw investor dollars from Ferrari.
Other manufacturers have seen the success of the Ferrari spinoff from Fiat/Chrysler and could look to replicate that formula. VW owns Porsche and that franchise
value has been speculated at a $100B value. VW also owns Bugatti, Audi and Lamborghini. McClaren is owned by?
Secular trend towards Electric vehicles. Other luxury manufacturers have announced plans to produce high performance luxury
EV’s. Ferrari has not and may be behind in this secular trend.
Tighter emissions control by government agencies or the possibility of elimination of internal combustion engines by various high polluting countries.
Global economic
environment is considered to be at a ‘peak’ by many.
Transition of leadership - the perception of a transition from a visionary leadership to a new, unknown and untested leadership.
Requirement to stay in top Formula 1 position affects
brand perception.
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