Ferrari, known for its luxurious and high-performance sports cars, has built its brand on a rich history of motorsport excellence and exclusivity. Despite being in a market where utility alone does not justify prices, Ferrari has successfully maintained its premium position.
Market Outlook for Ferrari
Ferrari has been doing really well financially, with its earnings per share (EPS) growing significantly from 2016 to 2023, from €2.11 to €6.90, representing a compound annual growth rate (CAGR) of 18.4% in euros. This growth has led to a big increase in Ferrari's stock price since it started trading in 2015. According to a report by Supernatural Stocks Podcast, analysts expect Ferrari to keep growing its earnings, with an estimated adjusted EBITDA of at least €2.45 billion for 2024.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It's a measure of a company's operating performance, specifically how much profit it's generating from its core operations.
When analysts expect Ferrari to achieve an estimated adjusted EBITDA of at least €2.45 billion for 2024, they are essentially predicting that Ferrari will make at least €2.45 billion in profit from its core business activities, excluding certain expenses like interest on loans, taxes, and accounting charges related to the depreciation of assets.
This metric is often used by investors and analysts to assess a company's profitability and financial health because it provides a clearer picture of how well a company is performing without the impact of non-operational expenses.
Investor Sentiment
Even though Ferrari is performing well, some investors think its stock is expensive because it's trading at over 50 times its estimated earnings for this year. This means investors are paying a high price for each euro of Ferrari's earnings.
However, many analysts are still optimistic about Ferrari's stock. According to a report by Business Insider, Bernstein, for example, reaffirmed their Buy rating, citing the company's strong fundamentals and growth potential. Ferrari's share buyback program also shows that the company is committed to increasing shareholder value.
Additionally, Ferrari's ongoing share buyback program, totaling €238 million for 670,642 shares on Euronext Milan and $108 million (€99.4 million) for 269,191 shares on the NYSE, demonstrates its commitment to enhancing shareholder value.
This means that Ferrari has been buying back its own shares from the stock market. When a company buys back its shares, it reduces the number of shares available to the public, which can make each remaining share more valuable for its shareholders.
Overall, Ferrari's strong brand, along with its financial performance and strategic plans, make it a potentially good investment opportunity in the luxury automotive sector. Despite its high valuation multiples, Ferrari's consistent performance and market position continue to attract investors. For more information, you may check Ferrari's Q1 results presentation here.
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