Last Update03 Oct 25Fair value Increased 1.11%
Ferrari’s analyst price target has been raised from approximately $525.00 to $530.84. This increase reflects analysts’ expectations for improved margins and robust capital returns, even as revenue growth estimates moderate slightly.
Analyst Commentary
Recent street research reflects a mix of optimism about Ferrari’s long-term growth prospects and some caution regarding near-term valuation and guidance. Analysts have updated their price targets and provided commentary ahead of key company events, such as the upcoming Capital Markets Day and new model launches.
Bullish Takeaways- Bullish analysts highlight Ferrari’s strong brand heritage and robust pricing power as underpinnings for durable returns on capital. These factors support a compelling long-term investment thesis.
- There is expectation for price and mix-driven upside, particularly as the company pursues ambitious mid-term targets, including adjusted EBIT margins with potential to exceed 30 percent.
- Analysts anticipate near-term catalysts from new model announcements and major events. Examples include the unveiling of Ferrari’s first electric vehicle concept and the presentation of a detailed "value over volume" strategy.
- Forecasts include potential increases to the dividend pay-out ratio and share buyback programs, which indicate management’s confidence in capital return and balance sheet strength.
- Some analysts have trimmed their price targets due to the view that 2025 guidance may only see slight improvement in sales and EBIT margin, with certain longer-term plans aligning with consensus expectations.
- Concerns have been raised that recent share weakness could result from market overreactions to guidance updates or comments regarding U.S. residual values. This suggests volatility related to ongoing news flow.
- Cautious perspectives suggest that while Ferrari can afford further buybacks, investors will closely monitor the company’s ability to deliver substantial EPS and free cash flow growth.
- A select group maintains a less constructive stance and warns that current valuation might outpace execution if targets are not decisively surpassed in upcoming strategic updates.
What's in the News
- Ferrari N.V. has confirmed its earnings guidance for the full year 2025, projecting net revenues to exceed EUR 7.0 billion (Key Developments).
- Guidance for 2025 is supported by a positive product and geographical mix, strong customer personalization, and increased contributions from racing and Formula 1 activities. These are driven by higher sponsorships and commercial revenue (Key Developments).
- The company is expanding its lifestyle activities and investing in the development and enlargement of its network to support revenue growth (Key Developments).
- Brand investments, increased digital transformation, and higher costs from ongoing supply chain challenges are expected in 2025. There will also be a higher effective tax rate due to changes in the Patent Box regime (Key Developments).
- Robust industrial free cash flow generation is anticipated, with strong profitability partially offset by more contained capital expenditures compared to the prior year (Key Developments).
Valuation Changes
- Consensus Analyst Price Target has increased slightly from $525.00 to $530.84.
- Discount Rate has risen marginally from 15.34 percent to 15.49 percent.
- Revenue Growth expectations have moderated, decreasing from 8.10 percent to 7.77 percent.
- Net Profit Margin is expected to improve modestly from 23.64 percent to 23.93 percent.
- Future P/E (price-to-earnings) ratio has fallen significantly from 67.5x to 58.3x, which reflects lower valuation multiples projected ahead.
Key Takeaways
- Expanded infrastructure and new models, including electrics, aim to boost revenue and margins through enhanced production flexibility and personalization.
- ESG initiatives and brand visibility investments enhance long-term growth and profitability by aligning with consumer trends and fostering engagement.
- A potential oversaturation from new model launches could dilute brand exclusivity, while supply and economic challenges threaten brand desirability, margins, and diverse growth.
Catalysts
About Ferrari- Through its subsidiaries, engages in design, engineering, production, and sale of luxury performance sports cars worldwide.
- Ferrari's expansion of infrastructure and product offerings, including the new e-building and paint shop for enhanced personalization, is expected to increase production flexibility, supporting revenue growth and improved net margins through operational efficiencies.
- The launch of six new models in 2025, including the anticipation of the Ferrari full electric, is likely to drive revenue growth, capturing both existing and new customers while expanding Ferrari's electrification journey.
- Continued focus on personalization, expected to remain around 20% of car and spare parts revenues, enhances the revenue stream due to the higher profit margins associated with bespoke options.
- Investment in lifestyle activities and brand enhancement, alongside new racing sponsorships, is intended to foster brand visibility and engagement, contributing to revenue growth and maintaining high profitability margins.
- Efforts toward carbon neutrality by 2030, including significant reductions in Scope 1 and 2 emissions through renewable energy use, are expected to support long-term earnings growth by aligning with increasing ESG initiatives and consumer preferences.
Ferrari Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Ferrari's revenue will grow by 8.0% annually over the next 3 years.
- Analysts assume that profit margins will increase from 22.8% today to 23.8% in 3 years time.
- Analysts expect earnings to reach €2.0 billion (and earnings per share of €11.45) by about March 2028, up from €1.5 billion today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 63.6x on those 2028 earnings, up from 48.7x today. This future PE is greater than the current PE for the US Auto industry at 18.2x.
- Analysts expect the number of shares outstanding to decline by 0.6% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 15.78%, as per the Simply Wall St company report.
Ferrari Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The influx of 6 new model launches in 2025 might lead to market confusion and dilution of brand exclusivity, potentially impacting the pricing power and overall brand desirability, which can influence net margins.
- Concerns regarding the sustainability in demand, specifically related to electric and hybrid car residual values, could lead to decreased customer confidence and pressure on future sales revenues.
- The observed trend of 81% of sales being attributed to existing customers raises questions about customer base diversity, which could limit revenue growth if this trend continues.
- The ongoing supply chain challenges might impact production efficiency and lead to increased costs, posing a risk to net margins and earnings.
- Changes in global economic conditions and potential tariff implementations could necessitate strategic pricing adjustments or impact market allocation, thus affecting revenues and profit margins.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $507.278 for Ferrari based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $597.04, and the most bearish reporting a price target of just $397.31.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €8.4 billion, earnings will come to €2.0 billion, and it would be trading on a PE ratio of 63.6x, assuming you use a discount rate of 15.8%.
- Given the current share price of $449.56, the analyst price target of $507.28 is 11.4% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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