Ferrari’s stock has declined on the Milan Stock Exchange after its third-quarter earnings report revealed revenues and profits below market expectations. Despite delivering 3,389 vehicles, a 2% drop from the previous year, revenue increased to €1.644 billion due to high-end sales and customization options. Analysts suggest maintaining a long-term view, as Ferrari reaffirms its 2024 targets. The decline is seen as temporary, with expectations of recovery from upcoming model deliveries and resolution of operational challenges.
Ferrari’s Stock Takes a Hit Despite Strong Performance
Ferrari, the renowned luxury car manufacturer, is experiencing a downturn on the Milan Stock Exchange following the release of its third-quarter earnings report. The company reported revenues and operating profits that fell short of market expectations, leading to a decrease in stock value.
While Ferrari is often compared to high-end brands like Hermès due to its exclusive nature, it remains fundamentally a car manufacturer. The stock performance of Ferrari has outshone other European automotive groups this year, boasting an impressive increase of 35%. In contrast, Renault, the second-best performer in Europe, has only seen a 10% rise.
Understanding the Decline in Deliveries
Despite its stellar reputation, Ferrari is not immune to the challenges facing many companies in this earnings season. The Italian automaker delivered 3,389 vehicles in the third quarter, marking a 2% decline from the previous year and falling short of the anticipated 3,454 units, as projected by Bernstein.
The decline in sales was particularly pronounced in the Greater China region, where deliveries dropped by 26%. Meanwhile, sales in the Americas decreased by 2%, although Europe saw a modest increase of 2%. Bernstein clarified that the decrease in deliveries was anticipated, attributed to the implementation of a new enterprise resource planning (ERP) system which began in late August, rather than a dip in demand.
Despite the decrease in vehicle deliveries, Ferrari’s revenue reached €1.644 billion, reflecting a 6.5% increase year-on-year. This growth was driven by a favorable mix of geographical sales and high-end product offerings, including customized vehicles tailored to individual customer preferences. These unique customization services significantly enhance profit margins and contribute to Ferrari’s overall growth.
Additionally, the company reported adjusted operating profit (EBITDA) of €638 million, a 7.1% rise from the previous year, although slightly below consensus expectations. Earnings per share increased by 14% to €2.08, and industrial cash flow stood at €364 million, slightly exceeding forecasts.
In response to the mixed results, Ferrari remains optimistic about its future, reaffirming its 2024 targets, which include projected revenues exceeding €6.55 billion and an adjusted EBITDA of at least €2.5 billion.
Despite the stock’s current decline of 6.8%, analysts advise investors to maintain a long-term perspective. Bernstein suggests that the dip in shipments may be misleading, emphasizing that the underlying growth trajectory remains intact. Royal Bank of Canada predicts that the stock’s decline will be contained due to limited appeal within the automotive sector at this time, positioning Ferrari as a rare investment opportunity amidst market volatility. The bank also anticipates that fourth-quarter results will benefit from increased deliveries of the SF90XX models and the resolution of ERP-related challenges, which should stabilize the company moving forward.