Ferrari had an outstanding year in 2021 and has followed that up with a great start to 2022. Every single key financial indicator in Q1 2022 was double digit positive and Ferrari’s guidance for the full year points to another year of expected strong results. 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. This really shines through when you compare and contrast the transparency with which Ferrari presents its results and the tone on the analysts call vs. that of another publicly listed niche UK supercar manufacturer. Despite the stock price being down rather significantly recently, and well off its 52 week high, Ferrari is still carrying a market cap over $37 billion. The recent share price drop is much more a reflection of overall turmoil in the stock markets these days than a reflection on Ferrari’s performance. Ferrari enjoys an overflowing order book and seems to be navigating the move to hybrids seamlessly. Ferrari’s continued strong 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.
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, two of its main competitors, McLaren & Aston Martin, have fallen back considerably. In the Sports Range, McLaren has been struggling with the transition to next generation hybrids and is only now starting to produce its first entry, the Artura. 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 former 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. In addition, the launch of the V12 powered Ferrari Purosangue SUV later this year is likely to put another fork into Aston Martin’s struggling DBX SUV.
As per the last Ferrari earnings call, this one was also less insightful than the one’s hosted by John Elkann (Executive Chairman) earlier last year. It looks like this will be the norm going forward as it is very much a reflection of the new CEO, Benedetto Vigna’s style. Vigna comes across as a modest man who holds his cards closer to his chest than his predecessors. Hopefully as he settles into the role and becomes more comfortable with the analysts he will open up a bit more. The CFO, Antonio Picca Piccon was also on the call and did his usual nice job of handling the various questions tossed his way. The areas that I found interesting follow:
Over the last several years, Europe received about 50% of Ferrari’s production. This jumped up to 54% in Q1 2022 as North American deliveries were cut back dramatically from 27% of total production in Q 1 2021 to 20% in Q1 2022 due to congestion in US ports. China and the rest of APAC also benefited from the cuts to North American production, rising to 9% & 17% of the mix respectfully. North America. The cuts in US deliveries have helped to keep the residuals on recent models at an all-time high. In fact, Vigna commented on the strength of the pre-owned Ferrari market. Looking around a few US Ferrari dealerships, in multiple cases 1-2 year old used cars are selling for over the original MSRP.
Other than Net Revenue, the 2022 targets do not appear to be the least bit ambitious, even taking into account the headwinds on product mix due to the phasing of the Icona models between the Q1 2022 end of deliveries on the SP1 & SP2 with the SP3 not starting until Q1 2023. Originally my guess was that Ferrari was setting up the new CEO with an easy to make year to build credibility with investors. In light of recent turmoil in the financial markets, hikes in interest rates, and global economic slowdown, these goals are looking more prudent. The next Capital Market presentation is on June 16th in Maranello where Ferrari will unveil its next major multiyear business plan. The great Q1 2022 numbers give Vigna plenty of credibility going into that event. 2022 is also Ferrari’s 75th anniversary so I would not be surprised if there is a new limited edition model announced this year to commemorate that event.
The Ferrari machine keeps going from strength to strength. It’s executed a major CEO transition flawlessly and Ferrari’s still hefty $37 billion market cap reflects this. Ferrari is about to announce its next 5 year plan in June and it will be Vigna’s job deliver both the growth and portfolio laid out in that plan. While Ferrari is well underway in the transition to hybrids, EVs will likely be the main focus as we get into the 2nd half of this decade. As engine sound has been such a core essence of the Ferrari driving experience for the last 75 years, how this gets resolved in the EV transition will be a major challenge. The F1 Team looks to be back on track which is a major accomplishment after a decade of mixed results. In 2021, Ferrari beat their guidance on every single financial metric and 2022 is off to a great start. However, the tailwinds on portfolio that helped deliver those results are about to become headwinds for the balance of the year. With an overflowing order book, an F1 Team back on track, and rich current portfolio of models, they should be able to beat their guidance again this year.
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