Forza Ferrari! Shares of Italian supercar maker Ferrari N.V. (NYSE:RACE) shifted into high gear in March, surging over 13% to end the month at $74.36. That was just a few wisps of tire smoke short of Ferrari's all-time high.
This price surge is a big change. In the months that followed its 2015 initial public offering and separation from Fiat Chrysler Automobiles (NYSE:FCAU), Ferrari's stock was sputtering. Ferrari is solidly profitable and ranks as one of the world's greatest brands, but investors were struggling to see how it might grow. The problem: Ferrari limits the number of cars it sells every year in order to preserve its exclusivity.
So what changed to make this big March run-up happen?
A few things happened. First, earlier in 2017:
- Ferrari posted a 38% increase in net income for 2016, showing that it could generate profit growth with high-priced special edition models even while keeping total sales close to 8,000 cars.
- CEO Sergio Marchionne said that Ferrari would gradually raise its sales limit over the next few years, acknowledging that its global market has expanded to wealthy customers in places like China and Russia.
- Ferrari's guidance for 2017 anticipates sales growth of about 5% to 8,400 vehicles. It expects that sales growth to drive a 15% or better increase in revenue and a 27% or better gain in EBITDA.
The pace picked up in March:
- Ferrari got a couple of well-timed upgrades from Wall Street.
- Ferrari driver Sebastian Vettel won the Australian Grand Prix, the first race of the 2017 Formula One season.
Long story short: The Prancing Horse is hitting on all 12 cylinders right now.
We'll see if Ferrari is sustaining its momentum when it reports its first-quarter earnings result on May 4.
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