Ferrari Deserves To Trade At A High Multiple, It Is The World’s #1 Brand
$FRRI, $FCAU
From Maranello to Wall Street, Ferrari has come a long way in its 86-yr history.
The company is preparing for its NYSE debut, and investors are expecting super 1st day of trading.
The company has a unique history that many people do not know about, or understand.
Scuderia Ferrari began as a racing team by Enzo Ferrari, the Scuderia was building and racing its 1st Ferrari badged cars in Y 1947, and has competed in every season of the Formula 1 World Championship since.
Ferrari is part of the heart and soul of Italy, as the team’s passionate fans dubbed the Tifosi will attest.
Enzo Ferrari only started selling his race cars to civilians as a means to raise money for his racing team. The popularity of those cars has led to the racing and automotive legend that Ferrari is today, and that legend has grown since the death of Enzo Ferrari in Y 1988. Ferrari is the World’s # 1 brand.
Now comes Sergio Marchionne, CEO Fiat Chrysler Automobiles (NYSE:FCAU), which owns Ferrari.
Mr. Marchionne understands the importance of Ferrari, the “Sacred Brand” of Italy and the World. He understands the racing heritage of the company, once boasting a Ferrari that doesn’t win on the track, is, in fact, not a Ferrari.
He also understands how to make money.
As Ferrari prepares its updated IPO filing which will be released Monday, Tuesday latest. The word on The Street is the IPO could see the company’s valuation hit as high $12.4-B. As Mr. Marchionne has predicted.
Ferrari is a unique asset, it is a unique brand, it definitely qualifies as the top world class luxury brands out there, and it is profitable, the $12.4-B valuation is a premium but not outlandish, as the firm has good, reliable cash flow margins.
The firm’s business is not cyclical like the automakers since it builds a limited number of cars every year that are often spoken for in advance by passionate buyers – regardless of economic climate.
No discount marketing from Ferrari…
Mr. Marchionne makes the case that Ferrari deserves a higher valuation than automakers, because the company is like a luxury goods maker. Those companies trade at 20X profit, as opposed to automakers who trade in the 7 -9X range.
The company deserves to trade at a higher multiple, or premium, given that argument.
The Big Q: How big should that premium be, and how durable is that premium going to be, over time.
Ferrari will trade on the NYSE with the ticker “FRRI” and will likely be priced early next week.
Have a terrific weekend.
Paul Ebeling
HeffX-LTN
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