Bernstein SocGen Group has made a significant adjustment to Ferrari's (NYSE: NYSE:RACE) stock, raising the price target from $488 to $599, while keeping an Outperform rating on the luxury car manufacturer.
The adjustment comes after Ferrari's second-quarter results for 2024, released on August 1, exceeded market expectations, prompting an update in the full-year earnings forecast.
The rationale behind the increase is based on the valuation approach used by the analyst, which now applies a 10% premium to the multiples of Hermès, a luxury goods manufacturer, in determining Ferrari’s valuation.
The premium was previously set at 5%. Despite a previous reduction in the target price from $512 to $488 following the second-quarter report, the recent strong performance of Ferrari's stock, which has seen a 20% increase since the earnings release, has led to the revised target.
Ferrari's stock has outperformed Hermès over the same period, with Hermès shares seeing a 7% rise. This contrast in performance further supports the analyst's decision to reassess the valuation metrics used for Ferrari.
The analyst has now chosen to streamline the valuation method, excluding certain multiples that were previously considered, such as EV/Sales, EV/EBITDA, EV/EBIT, and P/E, from the valuation model for Ferrari.
In other recent news, Ferrari N.V. reported a robust second quarter in 2024, with revenues surging to €1.7 billion, marking a 16% increase year-over-year, and net profits reaching €413 million.
The company attributes this positive performance to an increase in customized orders and clear visibility for future sales. In contrast, Magna International (NYSE:MGA) Inc. reported a miss on its second-quarter results, with adjusted earnings of $1.35 per share falling short of the projected $1.44, and a dip in quarterly revenue to $10.96 billion.
Ferrari has also announced the conclusion of its partnership with banking giant Santander (BME:SAN) by the end of 2024, marking a significant change in the sponsorship landscape for the luxury sports car manufacturer. Analysts at Morgan Stanley and Barclays have expressed confidence in Ferrari's future, with Morgan Stanley raising the company's price target to $520 and maintaining an Overweight rating, and Barclays upgrading the stock from Equalweight to Overweight with a new price target of EUR450.00.
InvestingPro Insights
The recent bullish sentiment on Ferrari (NYSE: RACE) is further substantiated by data and insights from InvestingPro. With a robust market cap of $89.22 billion, Ferrari's financial health appears solid. The company's P/E ratio stands at a high 58.12, which may raise questions about valuation; however, this is often the case with premium brands that command a luxury market positioning. The revenue growth of 15.28% over the last twelve months as of Q2 2024 highlights the company's strong sales performance, supporting the analyst's optimistic outlook.
InvestingPro Tips indicate that Ferrari has raised its dividend for 3 consecutive years, signaling confidence in its financial stability and rewarding shareholders. Additionally, the company has maintained dividend payments for 9 consecutive years, further emphasizing its consistent performance. With 4 analysts having revised their earnings upwards for the upcoming period, there is a consensus that the luxury car manufacturer's financial trajectory is on an upward trend.
For investors seeking a deeper analysis, InvestingPro offers additional tips that could provide more nuanced insights into Ferrari's stock performance and financial health. These tips can be found at InvestingPro's dedicated Ferrari page. With these metrics and insights, the raised price target by Bernstein SocGen Group seems to align with the data-driven perspective provided by InvestingPro.
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