Luxury sports car maker Ferrari, the iconic Italian firm based in Maranello, Italy, experienced an immediate 12% plunge in its stock price. In fact, in premarket trading, the price dropped more than 14.8%. The company provided further insight into its financial guidance and technology advancements earlier this month at its Capital Markets Day (CMD) event. Consequently, shares plummeted. Investors took in the updated revenue projections with a shrug, the announcement delivering an underwhelming forecast.
At the CMD, Ferrari shared an exciting picture. They project net revenue of at least 7.1 billion euros ($10.7 billion) this year, exceeding their previous projection of more than 7 billion euros. This announcement was met with widespread disappointment by analysts who expected the crme de la crme automaker to do a lot better. For reference, Ferrari is targeting about 9 billion euros of revenue in 2030. They aim for an EBITDA of at least 3.6 billion euros in that year.
Under the leadership of Benedetto Vigna, Ferrari’s CEO since 2021, the company has moved towards more cross-disciplinary work to foster innovation and efficiency. Even before this shock announcement, his leadership style was being credited as the primary driver behind Ferrari’s revitalized emphasis on developing lofty technology. At RCL’s CMD event, Vigna pointed to the company’s deep commitment to innovation. They’re preparing to market the first Chinese-made EV anywhere in the world next year.
“With the new Ferrari elettrica, we once again affirm our will to progress by uniting the discipline of technology, the creativity of design and the craft of manufacturing.” – John Elkann, executive chairman of Ferrari
The introduction of the electric vehicle marks a pivotal moment for Ferrari as it seeks to align with changing market demands and consumer preferences. Analysts believe that this was an important move to unlock the brand’s long-term growth opportunity. When it comes to the management’s ability to execute its long-term strategy, JPMorgan analysts have no doubts even after recent outlandish stock volatility. In fact, they mentioned the evidence of intense demand in the upper end of the market that outstrips supply at the moment.
“We have a great deal of confidence in management’s ability to execute on its long-term plan given ample evidence that demand currently far outstrips supply.” – JPMorgan analysts
JPMorgan analysts pointed to Vigna’s leadership as a driver for more collaboration across the bank. Their collaboration may help lead to both companies’ profitability through promising new product introductions.
Not all analysts are as hopeful. Citi analysts had a bone to pick with Ferrari’s revised guidance. They noted this is conservative, and in fact below their “lower growth case” projections shared in the CMD preview. They cautioned that this conservatism would come at the expense of consensus earnings per share (EPS) and multiple valuation doom. These risks might emerge not too far down the road.
“Falls below our ‘lower growth case’ estimates from our CMD preview and reflects conservatism from management, we think.” – Citi analysts
Ferrari has a few other strikes against them. It remains focused on continuing its legacy of high-performance automotive engineering in the move to electric mobility. The timing of its upcoming launch of electric vehicle will be critical for the company’s competitive posture. This year’s event will be crucial as the auto world continues to change.