Ferrari (RACE): Notes from Management Meetings; Raising PT - UBS

August 8, 2016 10:13 AM EDT
Get Alerts RACE Hot Sheet
Price: $62.68 +2.62%

Rating Summary:
    4 Buy, 2 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 19 | Down: 19 | New: 13
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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.

For an analyst ratings summary and ratings history on Ferrari click here. For more ratings news on Ferrari click here.

Shares of Ferrari closed at $46.88 yesterday.

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