Ferrari: The case for RACE (RACE IM) Alphinity Investment Management September 2023 Ferrari is one of the world's most iconic brands. It's also an amazing stock. Ferrari was founded in Italy in the 1940s and was spun off from Stellantis in 2016 under the ticker RACE IM.
The IPO price was EUR43 and Ferrari is currently trading at ~EUR300 for a 600% return since listing. The analysis below outlines the Case for RACE and highlights 4 main reasons to why we love the stock. RACE Stock Price Since Listing in 2016
Reason #1: High margin, high return, high growth business
Point #2: A+ industry structure leads to earnings visibility and upgrades From this perspective, Ferrari is literally the textbook case of an A+ company. They are a heritage brand with incredibly high barriers to entry, they have few competitors, few substitutes, price insensitive customers with very little bargaining power, and a supply chain that is localised and very difficult to replicate. The net result is that Ferrari has an immense level of control over its own earnings and strong earnings visibility. Management upgraded its FY23 revenue guidance, adjusted EBIT margin guidance as well as adjusted EPS and FCF estimates at the last result. More importantly, this upgrade cycle is a consistent pattern shown by RACE management since listing.
Reason #3: Impressive Brand Recognition and Unique Positioning Among Auto Peers Ferrari is refreshingly contrarian on both these fronts. Ferrari management has made a strong commitment NOT to get into autonomous driving (AD). The whole point of buying a Ferrari is to drive it yourself! While Ferrari is a leader in hybrids with approximately 45% of deliveries already in the hybrid space, it's first fully electric car will not be presented until 2025 with the first deliveries the following year. They do not expect pure EVs to be more than 5% of total shipments by 2026. Part of this is strategic positioning that one of the great joys (so I am told) of owning a Ferrari is the vrooooom, sound it makes when you start the ICE engine. EVs don't vroom so Ferrari plans to continue to develop ICE engines into the 2030s. Reason #4: Technological leader Investment Risks Conclusion |
Funds operated by this manager: Alphinity Australian Share Fund, Alphinity Concentrated Australian Share Fund, Alphinity Global Equity Fund, Alphinity Sustainable Share Fund Disclaimer |