Ferrari (RACE): Notes from Management Meetings; Raising PT - UBS
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UBS analyst, Michael Binetti, reiterated his Buy rating on shares of Ferrari (NYSE: RACE) after a strong 2Q & management meetings. RACE significantly beat 2Q estimates, with €217m in adj EBITDA (Street:€194m), €811m in revs (Street: €754m), & car units +7.5% YOY.
The analyst held meetings with RACE last week which boosted his confidence in upside to Consensus '16 & '17 estimates. The analyst stated "We're raising our '16E adj EBITDA to €825m (+10.2% YOY) from €805m prev. Importantly, we believe there is very credible upside case where RACE can achieve its long-term target from the IPO (€1B in adj EBITDA, 9k units/yr) a year ahead of its 2019 plan—which we believe will be a catalyst for positive revisions to Street ests and create a favorable backdrop for the stock".
RACE's recent comments on price increases are underappreciated as profit upside drivers going forward. RACE has successfully tested like-for-like price increases of 3-5%, vs 1-2% increases in recent yrs. In our view, increasing pricing power could be a significant source of upside to RACE's EBITDA trajectory (vs the IPO EPS algorithm that was built based on 1-2% pricing power). On our math, a +1% increase in Cars & Spare Parts revenues from pricing translates to +260bp lift to EBITDA growth, compared to a +70bp lift to EBITDA growth from +1% of volume growth.
The new price target of $53 is up from $50.
Shares of Ferrari closed at $46.88 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS View, Analyst PT Change
Related EntitiesUBS, Raising Prices, IPO
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