Ferrari bears reconsider their position after announcement of strategic plan
French bank Societe Generale has long questioned whether Ferrari’s stock is overvalued. But last Wednesday, it changed its tune. Describing the company’s rededication to its highest-end clients as a “game changer”, Societe Generale raised its price target by 40%, and finally changed its recommendation from “sell” to “hold”. Equity analyst Stephen Reitman was succinct in describing the bank’s turnaround: “the facts have changed and so we have changed our mind on Ferrari.”
Ferrari’s share price is up by 11% so far this year
SOURCE: Yahoo Finance
The main point for Reitman is that Ferrari should be focussing on its core business of luxury supercars. He criticised the company’s plans to pursue growth through an SUV, as there was widespread competition in that market. Additionally, he added that a “dash for growth” could do serious damage to Ferrari’s perceived exclusivity – the engine upon which its brand runs.
However, in the time since former CEO Sergio Marchionne’s unexpected death (just a few months ago) new CEO Louis Camilleri has chosen to focus his strategy on runs of limited-edition supercars aimed at the highest end of Ferrari’s already high-end customer base. The SUV? It’s still going ahead – but plans have been pushed back two years until 2022.
Reitman said: "The new mid-term plan broadly repeats the key financial objectives laid out in February, but the way Ferrari plans to achieve them appears to have fundamentally altered." A month ago, Camilleri presented his plans (which hew close to his predecessor’s vision) to investors. He described the strategy in the following terms: “This is an ambitious plan, but a doable one based on a concrete, detailed framework.”
Speaking about the now-delayed but still on the table SUV, he added: “As a die-hard Ferrarista, I have been a little skeptical when the concept was first voiced at the board. Having now seen the wonderful design concept, the extraordinary features ... I am a hugely enthusiastic supporter.”
Dominion holds Ferrari in its Global Trends Luxury Fund
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