- Sensu Investor
- Posts
- Ferrari N.V.
Ferrari N.V.
May 20, 2024
Ferrari N.V.
Ticker: RACE.NYSE
Addition to:
✅ SENSU Watchlist
Addition Date: May 20, 2024
Price per Share: 416.65 USD
⭐⭐⭐⭐⭐ Quality Score | ⭐⭐ Value Score | ⭐⭐⭐⭐ Growth Score |
TABLE OF CONTENTS
THE COMPANY
Ferrari's story begins in 1947 when Enzo Ferrari, a former race car driver and automotive engineer, founded the company in Maranello, Italy. Initially focused on producing race cars, Ferrari quickly gained recognition for its exceptional engineering and performance on the track.
The company's business model is centered around three key pillars:
Luxury Sports Cars: Ferrari produces high-performance, luxury vehicles known for their cutting-edge technology, exquisite design, and superior craftsmanship. The company maintains exclusivity by limiting production and carefully managing waitlists for new models.
Formula 1 Racing: Ferrari's participation in Formula 1 serves as both a marketing platform and a testing ground for new technologies. The company's racing heritage is a crucial part of its brand identity and contributes significantly to its prestige.
Brand Licensing and Merchandise: Ferrari generates substantial revenue through brand licensing and merchandise sales, estimated at around $2.5 billion annually. This includes everything from clothing and accessories to theme parks and experiences.
Looking ahead, Ferrari is adapting to industry trends by developing hybrid and electric vehicles, with plans to introduce its first fully electric car in 2025. The company is also expanding its product line, recently introducing its first SUV-like vehicle, the Purosangue.
Ferrari's business model combines luxury automotive manufacturing with a powerful brand that extends far beyond car sales. Its success is built on a foundation of exclusivity, performance, and a rich racing heritage, positioning it uniquely in the luxury goods sector rather than as a traditional automaker.
STOCK PRICE
The dynamic background color reflects overall market valuation, allowing you to quickly assess both stock-specific trends and market conditions at a glance.
Why logarithmic? It displays percentage changes uniformly, making price movements easily comparable across different ranges. A 100% increase appears the same whether from $10 to $20 or $100 to $200.
MANAGEMENT ANALYSIS
Meet the CEO: Benedetto Vigna
Benedetto Vigna has been at the helm of Ferrari as CEO since September 2021, bringing a fresh perspective to the iconic Italian automaker. With a background in physics and over 25 years of experience in the tech industry, Vigna is not your typical automotive executive. Prior to joining Ferrari, he made a name for himself at STMicroelectronics, where he pioneered smartphone technology that's now ubiquitous in our daily lives.
Vigna's leadership style at Ferrari has been characterized by a focus on innovation and agility, drawing inspiration from tech startups rather than traditional car manufacturers. He's been pushing Ferrari to embrace new technologies, particularly in the realm of electrification, while still maintaining the brand's legendary performance and exclusivity.
An interesting fact about Vigna is that he holds over 200 patents in microsystems and chip-making, showcasing his deep technical expertise. This background has proven valuable as Ferrari navigates the complex landscape of electric and hybrid vehicles. Under Vigna's guidance, Ferrari has been making strides in sustainable mobility without compromising the thrilling driving experience that defines the brand.
Employee Sentiment
The Positives
Employees consistently praise Ferrari for its prestigious brand, exciting and innovative work environment, and opportunity to be part of an iconic company. Many reviewers highlight the chance to work with cutting-edge automotive technology and be involved in Formula 1 racing. The company offers good benefits, including healthcare and a competitive bonus structure. Employees appreciate the dynamic, fast-paced atmosphere and the chance to work with highly skilled colleagues. The company's location in Maranello, Italy is seen as a positive by many, with good work facilities and an excellent company cafeteria. Ferrari's strong focus on quality and attention to detail is frequently mentioned as a point of pride for employees.
The Negatives
A common theme in negative reviews is the high-stress work environment with long hours and intense pressure to perform. Many employees cite poor work-life balance as a major drawback. There are complaints about low base salaries compared to industry standards, with compensation heavily reliant on bonuses. Some reviewers mention a lack of career growth opportunities and limited internal mobility. Management is often criticized for being old-fashioned, hierarchical, and resistant to change. There are reports of internal politics and favoritism affecting decision-making and promotions. Some employees feel that the company's prestige and exclusivity lead to an attitude of arrogance among some managers. The location in Maranello is seen as a negative by some, who find it isolating and lacking in social opportunities outside of work.
“Passion is what drives the firm... Disorganization, lack of company structure and leadership. Decisions are based on emotions and how the company is perceived.”
"Multinazionale, dinamica, piena di nuove sfide... Poca possibilità di crescita all'interno dell'azienda"
"Brand, azienda strutturata ma di dimensioni non esagerate... burocrazia processi approvativi, location Maranello"
FINANCIAL ANALYSIS
Earnings Yield
Ferrari's earnings yield has shown a downward trend in recent years, declining from a peak of 4.8% in 2018 to 2.3% in 2023. The current trailing twelve months (TTM) yield of 1.9% indicates continued pressure on profitability relative to the company's market valuation. This declining trend suggests investors are paying an increasing premium for Ferrari's future growth prospects.
Despite the low yield, Ferrari maintains strong profit margins and brand power. The company's strategy of controlled production and exclusive product offerings has historically supported its premium valuation. Recent product launches and a growing order backlog indicate robust demand, which could help sustain revenue growth.
Return on Invested Capital
Ferrari's Return on Invested Capital (ROIC) has shown a strong upward trend in recent years, reaching 20.34% in 2023 from 15.39% in 2022. This improvement indicates Ferrari is effectively utilizing its capital to generate higher returns. While there have been fluctuations in the past decade, the overall trajectory is positive. Investors should remain aware of potential risks to the company's exclusivity and pricing power as it pursues growth strategies.
Price-to-Book Ratio
Ferrari's price-to-book (PTB) ratio has fluctuated significantly over the past decade, reflecting changing investor sentiment and valuation. After a dramatic dip in 2015, likely due to its IPO, the ratio has generally trended upward, reaching 18.13 in 2023.
MOST SIGNIFICANT MOATS
Ferrari's brand is one of the most recognizable and valuable in the world. The prancing horse logo evokes images of luxury, performance, and exclusivity. This powerful brand allows Ferrari to command premium prices and maintain high profit margins. Customers are willing to pay more for a Ferrari because of the prestige and status associated with owning one. The brand's strength also extends beyond cars to merchandise and experiences, creating additional revenue streams.
Ferrari carefully limits production to maintain exclusivity. They produce fewer cars than demand, creating waiting lists and driving up resale values. This scarcity makes Ferraris more desirable and allows the company to keep prices high. By controlling supply, Ferrari protects its premium positioning and avoids brand dilution. This strategy of "selling one car less than the market demands" has been key to Ferrari's success for decades.
Ferrari's long history of success in Formula 1 racing provides a halo effect for its road cars. Racing allows Ferrari to develop and showcase cutting-edge technology, which then trickles down to production vehicles. This racing pedigree gives Ferrari cars an aura of high performance and engineering excellence. It also provides a platform for continuous innovation, helping Ferrari stay ahead of competitors technologically.
MOST SIGNIFICANT RISKS
Risk: Failing to preserve and enhance the value of the Ferrari brand.
Impact: Could significantly reduce demand for Ferrari cars and merchandise, lowering sales and profitability. May also diminish Ferrari's ability to charge premium prices.
Mitigating Factor: Carefully controlling production volumes and maintaining high quality standards. Offering exclusive models and experiences to loyal customers.
Risk: Challenges in developing competitive electric car technology and changing consumer preferences.
Impact: Could lose market share to competitors who develop superior electric vehicles. May face reduced demand if Ferrari's electric offerings don't meet customer expectations.
Mitigating Factor: Significant investment in electric vehicle R&D. Gradual introduction of hybrid models to bridge the transition.
Risk: Decreased demand for luxury goods during economic downturns.
Impact: Lower sales volumes and revenues, especially for higher-priced models. Potential inventory buildup.
Mitigating Factor: Diversification into lifestyle products. Maintaining a strong order backlog to smooth out short-term fluctuations.
CATALYSTS FOR GROWTH
Ferrari has announced plans to introduce 15 new models between 2023 and 2026. This aggressive product rollout, including the launch of their first fully electric car in 2025, could generate excitement among consumers and investors, potentially boosting sales and stock performance.
Ferrari is broadening its brand beyond cars into high-end lifestyle products and experiences. Success in this strategy could open up new revenue streams and enhance the brand's overall value, possibly leading to stock price appreciation.
Ferrari has potential for further growth in Asia and other emerging markets. If the company can successfully expand its presence in these regions, it could lead to increased sales and profitability, potentially driving the stock price higher.
Disclaimer: The information provided in this newsletter is for educational and informational purposes only and does not constitute financial, investment, or legal advice. The content is solely the opinion of the author, who is not a qualified financial advisor, investment professional, or legal expert. All investments involve risk, and past performance does not guarantee future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions. The author of this newsletter is not liable for any losses or damages arising from the use of the information provided. This newsletter is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would be contrary to local law or regulation.
Reply