Ferrari had a spectacular year in 2022. Every single key financial indicator grew double digits vs. 2021. In Q3 2022, Ferrari raised its guidance on every single key metric and then went ahead and beat even the raised goals. 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 2022 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. Since the Q3 results were announced, Ferrari stock has been on an upward trajectory and is just off its all-time high. Today, Ferrari’s market cap is around $50 billion, putting it about on par with Ford, despite selling 0.7% as many cars (I guess the Ford GT didn’t do much for Ford’s market cap). The recent share price rise is even more impressive when you consider the overall turmoil in the stock markets these days and is a huge vote of confidence in Ferrari’s performance. The CEO transition to Benedetto Vigna has been flawless and Ferrari did 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.
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 Granturismo Range, and the Limited Edition segment, 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 has struggled with the transition to hybrids. On the Granturismo side of the business, Ferrari is now so far ahead of Aston Martin, I’m not sure Ferrari even still views them as a competitor. On the Limited Edition Hypercars, McLaren has throttled back on production and while Aston Martin is still very actively collecting customer deposits for every idea they can come up with, production on AML’s flagship, the Valkyrie, has not exactly gone smoothly and its successor, the Valhalla appears to be mostly vaporware at this point.
The Ferrari earnings call was a lot less insightful than when John Elkann was the acting CEO and doing them. Elkann, as he is effectively Ferrari’s controlling shareholder, was always willing to provide a bit more color and insights into Ferrari’s longer-term strategy 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 cards very close to his chest. The areas that I found interesting follow:
Over the last several years, Europe received 46-48% of Ferrari’s production. This rose to 49% in 2021 but dropped back to 45% in 2022 despite an 8.5% rise in deliveries. North American deliveries accounted for 26% in 2022, flat vs. 2021 but still up 22% in terms of actual units given Ferraris overall increase in production. Ferrari seems to quite deliberately adjust supply to take advantage of currency movements. As the US dollar remained quite strong vs. the Euro in 2022, the US received a higher allocation of new cars. Supply in the US, even with a 22% increase in units, is still short of demand. As a result, residuals on recent model are still very strong.
Other than Net Revenue, the 2023 targets do not look overly ambitious, given the start of the Purosangue & Daytona SP3 shipments. Given how Ferrari blew away its initial 2022 guidance, this feels a bit like another round of under promise and then over deliver.
In a Bloomberg Interview in Feb 2023, Ferrari CEO, Benedetto Vigna was asked “What is the biggest threat you see for Ferrari?” His answer, “I can’t see any specific threat for Ferrari.” I think this is the biggest risk they have. A bit of paranoia might not be a bad thing. A decade ago, McLaren created a supercar business from scratch and Ferrari had to play catch up in terms of performance for years. While McLaren’s recent struggles are well documented, a resurgent McLaren lead by Ferrari’s former Chief Technology Officer could be a serious threat again. Longer term, a Geely controlled Aston Martin could also prove to be a formidable competitor in the SuperSUV and Gran Turismo segments. Given the success of the T.50 & T.33 there is also a potential threat from Gordon Murray Automotive if it continues to expand its portfolio. While Ferrari might have plenty of space in-between itself and nearest competitors right now, that gap can close quickly.
The Ferrari machine keeps going from strength to strength. It’s executed another CEO transition flawlessly and Ferrari’s hefty $49 billion market cap reflects this. Vigna must lead Ferrari seamlessly through the transition to hybrids and EVs while protecting the core legacy internal combustion business for as long as possible. Getting the F1 Team back to the front of the grid would just be icing on the cake. In 2022, Ferrari beat their guidance on every single financial metric for the 2nd year in a row, now they just need to repeat this in 2023, which given the current model portfolio, bruised competition, and overflowing order book, they have a very good chance of doing so.
Thoughts and comments? Please see the comments section below.
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Was talking to my dealer today and the biggest issue they have is nothing to sell new car wise going forward currently with 296 sold out , Roma , 812, portofino production closing and the SUV waiting list . They also expect production to be limited to 11000 units going forward.Great management and brand marketing makes it the market leader !
Roma production closing? I thought they were bringing a V12 variant?
So much more than the froth even from the best auto magazines pan global.
Great analysis especially towards the risk of competitors. Although with Aston Martin they’ve already decided to shoot themselves in both feet, again, with Reichman doing their 2023 updates.
Red Bull is also one which could be added to the list of competitors for their Hypercar. I guess from dissatisfaction with how the Valkyrie ended they’ve decided to do one themselves. It will also give some work to their powertrain company! Just don’t scratch the label off as it will say Honda…
Luca di Montezemolo previously stated that Ferrari shouldn’t produce more than 10,000 cars a year. I think this was back when Ferrari did about 8,000 a year and China wasn’t as open as it is today. They’ve obviously blown through that cap and still have the strength in product lines to build even more. You’ve got to be impressed with that alone.
Agree with your analysis of Ferrari.
They seem todo nothing wrong though they don’t float my boat in anyway.
Aston Martin really need the Geeley touch that can bring back the magic.
McLaren have definitely fallen back and l just hope they get their act together soon. Due to a lack of cars on the market folks are buying whatever they can as residuals are going up , which has to be good news.
Here in UK my friends and l are not interested in Hybrids or electric we all drive Petrol. Not one of them has bought a diesel come to think it.
Thing is decent Petrol cars are in general seeing stronger pricing, so get em well you still can.