Ferrari engineers and manufactures some of the world’s most expensive exotic sports cars. The Ferrari brand is synonymous with Formula One racing, exclusivity, Italian design, and state-of-the-art technology. Ferrari also has a captive finance company that provides funding for dealers and clients.
Recommendation (Nov 2020)
An outstanding business, but overvalued at $214.17 per share.
Today, RACE sells 10,131 cars and makes $3.9bn, or $382K per car.
If units sold grows to 15K in 2030 (4% YOY), and sales grow to $16.3bn as PIE implies, then avg. car would retail at $1.09m.
We know RACE has pricing power, but can it sell its cars for 3x today’s prices? Because that is what $214.17 per share implies.
If we assume that EPS will grow between 12-18% CAGR for 5 years and that RACE will trade at a PE multiple of 40x in 2025, then the implied Investor Return would be between 2-7.5%.
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