Ferrari Repositions Its Brand Before Its NYSE IPO
$FRRI, $FCAU, $TIF
Most see Ferrari as a maker of ultra luxury supercars. But Ferrari is not making the case that it is more of a luxury brand like Tiffany (NYSE:TIF) or Patek Phillipe, in in documents filed with the SEC just ahead of its IPO on the NYSE this month.
The word “luxury” appears in its amended IPO filings.
There is a good financial reason for this. Although Ferrari is profitable, sales are growing but automotive industry growth is slow. For the last 5 years, the company has shipped only about 7,000 cars annually:
If Ferrari was a company that sold generic products, that would make its valuation low. Investors buy future growth, not today’s growth.
But Ferrari’s $11.2-B valuation is 37X its earnings of about $300-M in Y 2014.
The word “luxury” is the reason Ferrari believes it can command a high price. About 50% of Ferrari’s current assets consist of its iconic brand value. It is the world’s #1 brand
Goodwill” and “intangible assets” are just that: assets that exit as concepts backed with powerful IP (intellectual property) and copyright claims.
Vintage and Classic Ferrari cars are the most sought after and expensive cars in the world, with prices for some Tier 1 examples selling for as high as $55,000,000.00
This is what that looks like on Ferrari’s balance sheet:
Now compare that to the actual growth of Ferrari’s business. Its revenues are only growing at 5% per Quarter:
The reason the Ferrari IPO is over-subscribed is not because of the business’s current growth. But, more that investors see how powerful the Ferrari brand is, and how that brand can be extended into a wider luxury goods scenario.
Example: I a consumer cannot afford a Ferrari, a Ferrari watch, shoes, or fine leather jacket is more within reach, and carry a greater profit margin for the company.
That’s where Ferrari’s future growth will come from, as the IPO’s SEC filing states.
Ferrari is a unit of Fiat Chrysler Automobiles NV (NYSE:FCAU) and is set to IPO on this NYSE this month
Have a terrific weekend.
Paul Ebeling
HeffX-LTN
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