How Analysts View Ferrari Now After Disappointing Earnings

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When Ferrari N.V. (NYSE: RACE) came public in mid-October, the stock priced at the top of its expected range ($52) and opened at $60. After posting a first-day high of $60.97, the stock has never reached $60 again, and it closed on Friday at under $40.

Last week the company reported its first-ever quarterly earnings as a public company: net profit was €55 million (almost $60 million) for the quarter, down about 44% from a year earlier, and revenue was down about 1% to €744 million. 2016 guidance called for shipments of about 7,900 units and net revenues of €2.9 billion, with adjusted EBITDA of close to €770 million.

Reaction from analysts was uniformly mild as well:

  • Bank of America Merrill Lynch kept a Buy rating but lowered its price target from $60 to $56.
  • JPMorgan maintained a Neutral rating and lowered its price target from $52 to $46.
  • UBS kept a Buy rating but lowered its price target from $52 to $48.

According to British brand research firm Brand Finance, Ferrari was named the world’s most powerful brand in 2014 for the second year running. That brand power sold 7,664 cars in 2015, compared with 7,000 in 2014, so the increase to 7,900 in 2016 probably does not fire up investors’ engines. But the Ferrari brand’s value is based on scarcity, which means it can’t raise production by a lot if it wants to maintain its uniqueness. It’s a delicate balance.

Shares closed at $37.70 on Friday, down 3% for the day in a post-IPO range of $34.03 to $60.97. The consensus price target on the stock is $48.83 but that may change as new targets are blended in.