Ferrari had an outstanding year in 2021. Every single key financial indicator is now headed in the right direction. They beat their guidance on every single metric and with a broad and fresh product portfolio, they are poised to deliver outstanding growth in the years to come. Ferrari enjoys an overflowing order book and seems to be navigating the move to hybrids seamlessly. Ferrari’s 2021 results are a case study in what a highly competent management team, executing a clear strategy, that’s supported by wise forward thinking ownership looks like. Despite the stock price being down recently, and well of off its 52 week high, Ferrari is still carrying a market cap over $40 billion. The recent share price drop is more a reflection of overall turmoil in the stock markets these days directly than a condemnation of Ferrari’s performance. The CEO transition to Benedetto Vigna has been flawless and Ferrari has done a superior job navigating through the pandemic vs. all of its major competitors. I believe this is reflected in the transparency that Ferrari demonstrates when it presents the results. As it has throughout 2021, not only did Ferrari provide the usual year ago comparisons (which due to COVID are irrelevant) but they also provided the comparisons to the same period in 2019.
Ferrari’s superior job of navigating through the pandemic has given it a highly advantaged competitive position moving forward. In the two main “volume” segments of Ferrari’s business, the Sports Range and Gran Turismo Range, two of its main competitors, McLaren & Aston Martin, have fallen back considerably. In the Sports Range, McLaren has reduced production significantly and while its current range is still highly competitive, McLaren is struggling with the transition to next generation hybrids. On the Granturismo side of the business, Aston Martin has effectively ceded the field to Ferrari. Aston Martin’s current GT range is, in the words of Aston Martin’s CEO, “overage” and with updates to Aston Martin’s models not coming until late 2023, Ferrari should have achieved complete dominance in the GT segment by then.
The Ferrari earnings call was a bit less insightful than usual which I believe will be the norm going forward as it is a reflection of the new CEO, Benedetto Vigna’s style. The CFO, Antonio Picca Piccon was also on the call and did his usual nice job of handling the various questions tossed his way. Vigna comes across as a modest man who holds his card closer to his chest than his predecessors. I do miss having John Elkann, Executive Chairman and former acting CEO, on the call as Elkann was always willing to provide a bit more color and insights into Ferrari’s longer-term strategy than the more reserved Vigna. The areas that I found interesting follow (note: in terms of the financial results, I am using 2019 as the reference quarter as it gives a more balanced picture on the strength/weakness of the numbers):
Over the last several years, Europe received 46-48% of Ferrari’s production. This jumped up to 55% in 2020 and dropped back a bit to 49% in 2021 as more cars were sent to China and North America. North American deliveries accounted for 26% in 2021, down from a high of 32% in 2018 but still up 21.8% in terms of actual units. Ferrari seems to quite deliberately adjust supply to take advantage of currency movements. As the US dollar strengthened in 2021, the US received a higher allocation of new cars. Supply in the US, even with a 21% increase in units, is still short of demand. As a result, residuals on recent model are at an all-time high and in several cases 1-2 year old used cars are selling for over the original MSRP.
Other than Net Revenue, the 2022 targets do not look overly ambitious, even taking into account the headwinds on product mix due to the phasing on the Icona model transitions. My guess is Ferrari is under promising and will then over deliver, helping to build credibility for the new CEO with investors. The next Capital Market day will be on June 16th in Maranello where Ferrari will unveil its next major multiyear business plan. Vigna will want to have plenty of tailwind at his back going into that event. The other call out is 2022 is Ferrari’s 75th anniversary. In honor of this I would not be surprised if Ferrari announces a new very limited highly margin enhancing model that will have been presold to a handful of its best clients.
The Ferrari machine keeps going from strength to strength. It’s executed a major CEO transition flawlessly and Ferrari’s hefty $40 billion market cap reflects this. It will now be Vigna’s job to lead Ferrari seamlessly through the transition to hybrids and EVs, launch the Purosangue SUV, and park the F1 Team on the pointy end of the grid. In 2021, Ferrari beat their guidance on every single financial metric, now they just need to repeat this in 2022, which given the current model portfolio, bruised competition, and overflowing order book, they should be able to do.
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