In 2016, Ferrari (NYSE: RACE) outperformed legacy automakers and the broader market, with a 21.1% return year-to-date. What’s more, 2017 has been an even more prosperous year for the Italian luxury automaker, for as of August 31st, the Ferrari stock has delivered a stellar 95.8% return year-to-date. In comparison, Ford Motor has lost about 11.0%, while General Motors and Fiat Chrysler returned just 1.9% and 64.2% respectively.
The stock’s consensus 12-month target price is $93.65, which about 20% off its current share price of $114.49. Nevertheless, analysts’ target price for the company has risen from $79.30 to $93.65 in the past few weeks, due by large to Ferrari’s very strong Q2 earnings report.
The company released its Q2 earnings earlier last month, which exhibited a solid adjusted earnings-per-share of €0.72 euros, or $0.86, in the second quarter. That signals a rise of about 38.5% on a year-over-year basis. Moreover, the company’s Q2 revenues rose by 13.5%, with a 5.4% year-over-year increase in its global shipments. Additionally, Ferrari’s EBIT margin, or earnings before interest and tax, also climbed to 21.9% in the second quarter, compared to 19.3% in the same quarter last year.
As such, data compiled by Reuters indicates that 5 of the 9 analysts covering Ferrari have given the stock “buy” recommendations, whilst 2 have recommended “hold.” The remaining 2 expect Ferrari’s value to drop, thus they maintain “sell” recommendations on the stock. Nevertheless, there is undoubtedly a great deal of optimism surrounding the company as of late, for, at market close on August 31st, 662K shares changed hands in the last trading session, which pushed the trading volume up 100.25% over the stocks average daily volume. Additionally, Ferrari closed at just above $114 on August 31st, which is somewhat about the stocks 50-day moving average of $107.28, and well above the 200-day moving average of $85.31.
Ferrari stock performance since Jan 2016. Source: FactSet Data
A boost in the company’s ‘V12’ engine sales is likely the primary catalyst for the recent optimism surrounding the Ferrari stock. That is, back in 2016 Ferrari’s V12 engine car sales were much lower than in the prior year, which was the cause of major concern to investors, insofar that cars with V12 engines had accumulated higher profits for Ferrari than models fitted with a V8 engine. However, in the first half of 2017, the company has managed to revive its V12 car sales, reporting a 6.4% and 5.3% year-over-year increase in its global shipments in fiscal quarters 1 and 2 respectively.
As such, a continuation of this positive trend in Ferrari’s shipments will likely keep investors’ optimism in the company alive, as well as the stock trading well above analysts expectations.
(Kathleen Craig, Research)
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