Ferrari gets “buy” rating, €484 target as Berenberg sees luxury growth ahead

Berenberg initiated Ferrari NV (RACE) with a "buy" rating and a €484 price target, positioning the luxury automaker as a high-quality compounder distinct from traditional auto companies. The firm highlights Ferrari's durable 30% operating margins, strong pricing power, and strategy of managed scarcity, projecting significant sales and EPS growth underpinned by personalization and exclusive models. While acknowledging potential risks around EV demand, Berenberg emphasizes Ferrari's historical resilience and low China exposure, forecasting continued double-digit earnings growth driven by its core exclusivity.

Analysis

Berenberg has initiated coverage on Ferrari NV with a 'buy' rating and a €484 price target, positioning the company as a 'Hermès-style luxury compounder' rather than a traditional automaker. This thesis is supported by Ferrari's superior financial metrics, including operating margins of approximately 30%, free cash flow conversion exceeding 75%, and a return on invested capital above 30%. The valuation is pegged at 24 times 2027 EV/EBITDA, a 10% discount to Hermès. The firm's growth is underpinned by a deliberate strategy of scarcity—producing 'one less car than the market demands'—which sustains an 18- to 24-month order backlog and robust pricing power. Personalization is a key growth driver, now contributing 20% of car revenue. Berenberg projects sales to reach €8.67 billion and EPS to hit €12.15 by 2027. Despite this bullish outlook, a material risk identified is the launch of the first fully electric Ferrari in 2026, the Elettrica, as a poll indicates 77% of current owners would not buy it. This skepticism is balanced by the company's historical resilience, having maintained double-digit margins through past financial crises, and its limited exposure to China (8% of revenue), which reduces geopolitical risk compared to peers.

Key Decisions for Investors

• Given the 'buy' rating, strong financial metrics, and significant pricing power, investors could view Ferrari as a core long-term holding, aligning with the analyst's 'luxury compounder' thesis.
• Monitor key catalysts that could validate the growth narrative, including strategic updates from the October Capital Markets Day and the financial impact of the sold-out, high-value F80 hypercar.
• The primary risk to the long-term thesis is the execution and client reception of the 2026 Elettrica EV; investors should closely watch management commentary and early demand signals for this model.
• Consider Ferrari's relatively defensive posture within the luxury sector, given its proven resilience during economic downturns and its low 8% revenue exposure to China, which may insulate it from regional volatility.