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Chairman of Fiat Chrysler Automobiles and CEO of Exor, and Piero Ferrari, son of Ferrari Automotive Company founder Enzo Ferrari and Vice Chairman of the company, pose with a Ferrari outside the New York Stock Exchange after Ferrari's IPO on October 21, 2015.
Shares of supercar manufacturer Ferrari have been racing higher ever since the company's January 2016 IPO. The stock is up 71.4% and one analyst thinks it has more room to run.
In a note circulated to clients on May 2, UBS equity analyst Michael Binet reiterated his "Buy" rating on the stock and raised his price target from $74 to $85.
Binet said that he expects Ferrari to surpass its 2017 earnings guidance of $950 million and raise guidance to $1 billion by mid year. While UBS's estimates are even higher, Binet said that even his own estimates may be conservative, Here's Binet:
Even after raising our 2017 EBITDA estimates on increased shipments and revenues, we think there is still upside to our and consensus EBITDA estimates (UBSe: €965m, Consensus: €971m). In fact, we see potential for RACE to achieve its IPO target of €1B in EBITDA this year-two years ahead of the IPO target to reach €1B by 2019.
Looking past 2017, Binet said that Ferrari will be able to beat this year's impressive sales numbers with the addition of the Ferrari California relaunch and the continued success of higher production volume vehicles like the 488.
Binet also said that future earnings will be boosted with the edition of more special addition supercars, which carry "super margins." Many of Ferrari's special edition vehicles are only slightly different than preexisting vehicles so that means Ferrari can build them on preexisting platforms and sell them for more.
"In our view, the mix of revenues from "super margin cars" (e.g. Aperta, 70th Anniversary, TDF12, Japan 50th anniversary, or cars with some sort of premium pricing vs RACE's standard production road models) will increase to 15% of total company revenues from 13% in 2016. And we believe margins within the "super margin cars" category could be significantly higher in 2017 compared to margins in the super margin cars group in 2016. For example, the convertible LaFerrari Aperta largely leverages the original LaFerrari platform with minimal extra cost ("no roof"), but has an estimated average selling price of €1.8m compared to the original LaFerrari at €1.3m."
Binet told his clients looking ahead, expect Ferrari to begin rolling out cars with hybrid technology by 2019.
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