Ferrari is facing its 'most testing' year since its IPO

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  • Evercore ISI says Ferrari has six major challenges to overcome in 2018.
  • The stock has outperformed the S&P 500 since its 2015 initial public offering.

Ferrari has held its own since its 2015 initial public, outperforming the S&P and more than doubling its opening share price, but 2018 presents a new sets of challenges, Evercore ISI says.

In a note to clients Wednesday, analyst George Galliers laid out six challenges for the Italian motor company that could make 2018 a difficult year.

“2018 will be a challenging year for Ferrari, in our view, the most testing since the company’s IPO,” Galliers said. “We see six challenges which the company must overcome. And earnings growth is likely to slow, as the company lays down the foundations for the next 5 years.”

These are the specific challenges, per Evercore:

  • Challenge 1 – Rising investments
  • Challenge 2 – Weaker mix
  • Challenge 3 – FX
  • Challenge 4 – More relevant valuation comp base
  • Challenge 5 – Competitor’s products
  • Challenge 6 – Formula 1

It’s a lengthy list – one that includes competition like a potential Aston Martin IPO, Lamborghini beating Ferrari to the utility vehicle segment, and most comically, the full decade since Ferrari has won a Formula 1 driver’s championship – yet Evercore remains confident in Ferrari’s ability to persevere.

Galliers has a price target of $US115 for Ferrari shares, 4% below the stock’s $US120 price Wednesday afternoon. Wall Street analysts polled by Bloomberg have a slightly more bullish consensus target of $US131.

“Despite the challenges, slower earnings growth and our more conservative estimates, we believe that Ferrari, and its equity price, will prevail.”

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