Ferrari completed its IPO two days ago generating a lot of excitement as you might not be able to own the car but you can buy the stock! As we all know its not only a car but a leading luxury brand. They are selling the dream. Most people would never wait one year to buy a car but Ferrari can get away with their one year waiting list. If you are one of the lucky few Ferrari shipped 7,255 cars in 2014. They are expected to increase this to 9,000 a year by 2019 there's hope for all of us.
They are also very valuable unlike most cars they tend to hold their value. They have 22.9% market share of the luxury performance car market.
Stock expensive just like the car
Cars, auto parts and engine sales bring in the majority of revenues. 15% comes from sponsorships and branding most of it coming from Ferrari World in Abu Dhabi they also have 20 franchised and 12 owned stores. For me it's a tough business because it's hard to grow. Their growth has to be measured and controlled so not to damage the brand. Growth versus exclusivity. It's a fine balance having to please shareholders while keeping it exclusive for the customer. It's also expensive trading more like a luxury company (43 x trailing free cash flow) than a car company. As the Founder Enzo Ferrari says the best Ferrari ever built is the next one. Put me on the car waiting list and not the stock.
Jason
Decisive has no position in Ferrari (RACE).The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.
