RACE - Ferrari: Valuation Isn't Attractive (Rating Downgrade)

2024-03-30 13:25:20 ET

Summary

• Ferrari released a lower than anticipated 2024 guidance.
• We provided four negative take to consider.
• A slower growth scenario could raise doubts about Ferrari's intrinsic value, so we moved our rating to neutral.

Since early March 2022, our team has had a long-standing buy rating on Ferrari (NYSE: RACE ). With a publication called Ferrari To RACE Again , we recorded a triple-digit stock price appreciation (Fig 1). In 2024, we were also expecting an Outperformance , but we believe the company's valuation isn't attractive. While we like Ferrari's quality and long-term growth prospects, we lower our recommendation from buy to neutral. However, we raised the target price from €350 to €380 to reflect higher earnings estimates and lower expenses in the long term. We see the stock market focusing on quality companies; however, after a plus 30% since our last update (early January 2024), the stock trades at almost 12x sales and a P/E >50x on its 2024 guidance....

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