Wall Street is divided on Ferrari
Now a group of analysts has initiated coverage of the stock, and the two primary views that have emerged won't help the situation much.
Either Ferrari is a luxury brand and can justify a decent upside; or Ferrari will struggle, at least in the short term, to deliver on its promises to investors.
At Bank of America Merrill Lynch, John Murphy established a "buy" rating and a $60 target price. In an extensive note, he shows a clear understanding of what drives Ferrari and what had kept the automaker at the top of the luxury car market for decades:
Evercore ISI is more dubious about Ferrari, with a target price of $40 and a "sell" rating. The challenge, in the estimate of Evercore's analysts, is that Ferrari is still a car company, and car companies just can't deliver the same multiples as true luxury brands that sell clothing, watches, and the like. It isn't like Ferrari will start building another 7,000 cars in the next few years, far above the roughly 7,000 it now sells annually.
BNP's Stuart Pearson is also pessimistic. He initiated coverage with an "underperform" rating and a target price of $46. In his note, he argued that Ferrari should be able to make money, but like Evercore's team, he doesn't see the brand performing at the same level as other luxury firms:
But UBS's Michael Binetti is more optimistic. He joins BAML's Murphy with a "buy" rating and a $60 target price. He also highlighted Ferrari's exclusivity in his note initiating coverage:
The bottom line is that Ferrari's history of being an elusive automotive object of desire is supporting the bull case, while the bears are concerned that Ferrari won't be able to match the performance of luxury brands that aren't burdened by building something as complicated and expensive as a high-performance supercar.