Ferrari - Target price set at USD46/share – 2016 may lack fresh catalysts for Ferrari
To be clear, we are not pessimistic on Ferrari’s earnings potential (11% ‘14-19e EPS CAGR).
Nor do we doubt its worthiness of a luxury good multiple. However even on estimates that
assume Ferrari delivers EBIT margins of >20%, and setting our TP on luxury peer multiples
(11x ‘16e EBITDA, 24x PE) that include Hermes, LVMH, Prada, Richemont and Harley
Davidson, we still see 11% downside to the shares. Furthermore, with the margin impact of
accelerating volumes already visible at Q3, LaFerrari a headwind in 2016, and a material share
overhang as FCA distributes its remaining 80% stake in early Jan, we see few positive
catalysts in 2016 for Ferrari shares.
FCA - FCA stub value in focus as Ferrari spins in January 2016
With its remaining 80% stake in Ferrari set to be distributed to shareholders in early January, the
near-term investment debate for FCA will be dominated by its ‘stub value’. This should be
supportive to FCA shares – ex Ferrari at its current market price, the FCA stub trades at 2.7x
EBITDA (‘16e US GAAP) – a material discount to US peers at c.4x. Note that FCA shareholders
should receive c.1 Ferrari share for every 10 FCA shares they hold upon the demerger. At Ferrari’s
current market value, FCA shares should drop by EUR4.8/share upon the demerger of Ferrari.