As the maker of some of the world’s most highly prized luxury sports autos, Ferrari (RACE) needs no introduction, asserts Mike Cintolo, growth stock specialist and editor of Cabot Top Ten Trader.
The Italian supercar company has largely sidestepped the semiconductor shortage and Covid-related problems that have plagued other auto producers this year, and Ferrari’s well-heeled clientele have been on a buying spree of late.
Vehicle deliveries in the third quarter totaled 2,750, a 19% improvement from a year ago and up 11% compared to pre-pandemic 2019. Moreover, the average price of a Ferrari in Q3 was around $363,000 (up 2%), as customers weren’t averse to spending more money per car.
Revenue of $1.2 billion missed the consensus but increased 17%, continuing a trend of double-digit sales growth that the firm attributes to a stronger product mix and pricing, as well as higher sponsorship money from its partnership with the Formula One racing series.
Among shipments, sales of eight-cylinder cars jumped 39% and engine revenues rose 25%, while per-share earnings of $1.29 beat the consensus by 13 cents.
Looking ahead and also contributing to the strength was the unveiling (to rave reviews) of Ferrari’s latest Icona V12 limited-run model. Moreover, management is pursuing an electrification strategy with plans to launch its first full electric car in 2025, the prospects of which has Wall Street salivating.
One big institution upped its price target for Ferrari based in part on the potential for the firm to offer “a range of EV products at potentially higher prices than the average selling price of today’s Ferrari,” while increasing volumes. Looking ahead, analysts see 16% sales and 39% earnings growth for 2021, with growth continuing into the next couple of years.
Technically, RACE rallied for most of last year before losing momentum at the start of 2021, peaking around 230 in January and falling to 185 by March. The stock spent the next seven months chopping out a lateral, tightening basing pattern, but like so many names it got going in early October — both before and (especially) after the Q3 report.
RACE spiked on two big weeks of volume, and after peaking near 280, its latest pullback to the 25-day line looks normal. If you want in, it looks like a decent risk/reward situation here.
