Morgan Stanley analyst now prefers Italian luxury-car maker Ferrari NV
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Bloomberg News
Chiara Remondini
Published Mar 06, 2023 • 2 minute read
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The Ferrari logo on the hood of a 488 GTB sports vehicle parked outside of the New York Stock Exchange. Photo by John Taggart/Bloomberg files Tesla Inc. is no longer the favourite United States-listed automaker of Adam Jonas, the Morgan Stanley analyst who has been a long-time bull on the electric-vehicle maker.
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Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors Jonas now prefers Italian luxury-car maker Ferrari NV, saying it has the “longest order backlog, greatest earnings visibility and highest pricing power of any company we cover.”
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The maker of six-figure supercars such as the new US$415,000 Purosangue crossover has a “near unmatched brand” and is a defensive name in the sector amid macroeconomic uncertainty and a consumer squeeze, he added.
Ferrari’s U.S.-listed stock has gained 61 per cent since a low in June, and received a recent boost after the company raised its outlook amid strong demand from wealthy customers for its high-margin models.
Shares in Tesla have rallied this year, but are still down 51 per cent from a 2022 high. The Elon Musk-led company had a tumultuous year amid Musk’s takeover of Twitter Inc., investor jitters about growth assets and concern that high inflation and rising interest rates will dampen demand for EVs.
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Article content Jonas raised his price target on Ferrari’s U.S.-listed stock to US$310 from US$280, implying 14-per-cent upside from Friday’s close. His overweight rating — which he has held since May 2019, according to data compiled by Bloomberg — is one of 13 companies that rate the shares a buy or equivalent, while seven analysts rate Ferrari hold, and three recommend selling the shares.
The analyst has also rated Tesla overweight since November 2020. He’s been gradually lowering his price target on the stock since June, but in December said Tesla’s 2022 de-rating provided a buying opportunity in a year of a “reset” for the EV market.
In the March 6 note, Jonas acknowledged that Ferrari shares are expensive compared to most other automakers — at 22 times his 2024 EBITDA estimate — but pointed out that they trade at a discount to Hermes International SA, maker of the Birkin bag and other high-end leather goods.
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Article content Tesla’s US$310-billion surge sets high bar for Elon Musk’s master plan How investors can ride the EV boom without betting on Elon Musk Tesla is leading tech rebound that has stocks surging Ferrari also has underestimated opportunities tied to EV and new models, while investor concern about what the shift to EV means for Ferrari’s brand is misplaced, Morgan Stanley said.
The carmaker is preparing to add a hub for battery-powered cars in its historic factory in northern Italy, with the first fully electric Ferrari due to be unveiled in 2025. Three hybrid models accounted for 22 per cent of shipments last year.
“Building on their learnings from hybrid and applying the racing DNA, we believe Ferrari can offer an EV that will be just as high in demand as what investors are used to from internal combustion engines,” Jonas said.
— With assistance from James Cone and Esha Dey.
Bloomberg.com