UBS looks ahead to a strong start to Q1 for Ferrari (RACE.US): will highlight its unique business model and maintain its buying rating

The Zhitong Finance App learned that UBS released a research report forecasting Ferrari (RACE.US)'s first quarter results, saying it is optimistic about Ferrari's investment prospects in the context of challenges facing the luxury sector. The bank lowered its earnings per share forecast for the next three years by 3%, lowering the target price but maintaining the buying rating.

The bank expects that Ferrari's first-quarter results will once again prove the strength of its brand and the superiority of its business model. Despite the complicated macroeconomic situation, demand in the high-end market continues to exceed supply.

Furthermore, this week Ferrari announced a price increase of up to 10% for some models in the US market to cope with the 25% automobile tariff. The impact of this move on the company's profits is limited. The profit margin may face a potential risk of 50 basis points, but it highlights Ferrari's unique pricing ability and eliminates one of the key disadvantages of stocks.

The bank expects Ferrari to have a strong start to the year. The first quarter is probably the strongest performing quarter of the year. It has not yet been affected by tariffs, and the delivery volume of Daytona models will reach the highest level of the whole year.

The bank continues to be optimistic about Ferrari in an environment where the luxury industry faces challenges due to its scarce business strategy and strong customer relationships, as well as its strong execution and stable performance. Affected by foreign exchange and tariffs, the bank lowered its earnings per share forecast for 2025/2026/2027 by 3%. Maintain a “buy” rating.

First quarter results outlook: strong start

Ferrari will announce its first quarter earnings report before the US stock market opens on May 6. The bank expects the Group's sales for the first quarter to be 1,775 billion euros, up 12% year over year based on fixed exchange rates and reported exchange rates (foreign exchange impact is negligible).

In the automotive and parts sector, revenue is expected to increase by 10% at a fixed exchange rate, and shipments will increase 4% year over year. Product portfolios and personalized customization services slightly higher than last year (share of sales increased from 19% to 20%) will bring a 7% price mix contribution.

The bank expects revenue from the sponsorship, commercial and brand businesses to increase 30% year over year, mainly due to HP's sponsorship and the increase in F1 race revenue. Since the income statement has not been affected by US tariffs, the bank expects the EBITDA for the first quarter to be 686 million euros, with a profit margin of 38.7%, up 50 basis points from the previous year; the EBIT is 523 million euros, with a profit margin of 29.5%, up 160 basis points from the previous year.

The bank cut its earnings per share forecast for 2025/2026/2027 by 3%. Key drivers include: a) the foreign exchange rate update, which caused revenue to face a headwind of 90 basis points in 2025 and had a slight negative impact on profit margins; b) the implementation of US tariffs, which raised the organic growth rate by 120 basis points but had a negative impact on profit margins.

Overall, the bank expects the EBITDA margin and EBIT margin to drop 8% to 37.7% and 7% to 28.7% respectively in 2025.

Valuation: Buy, target price of $520, potential increase of 11%

The current valuation of Ferrari shares is 27 times the expected EV/EBITDA in 2025 and 25 times the 2026 forecast. The 2024-2027 sales and earnings per share compound annual growth rates are 8% and 9%, respectively. The bank's target price is based on a 1-year forward EV/EBITDA ratio of 27.5 times (previously 31.3 times). The bank lowered its target price due to lower profit expectations and lower industry valuation multiples.