Ferrari Is Selling More Cars, Engines, Sponsorships & Merchandise
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The pandemic sent people home, disrupted global supply chains, and required governments to print trillions of dollars in economic stimulus to soften the blow.
And no one benefitted from this more than the wealthy.
We all know how this works by now. The government prints money and lowers rates, inflation goes up, and rich people watch their assets increase in value while the 45% of Americans that don’t own investible assets watch their purchasing power erode.
Here’s the data — CNBC says that the world’s 2,755 billionaires saw their cumulative wealth increase by $5 trillion—a sum greater than the market caps of Apple and Amazon combined—since March 2021, from $8.6 trillion to $13.8 trillion.
That means that billionaire wealth grew more during the pandemic than it did during the previous 14 years combined.
And while mom-and-pop shops and other small businesses closed at a historic rate during the pandemic, luxury companies that count millionaires & billionaires as their target customer base benefitted to an outsized degree.
For example, Italian luxury sports car manufacturer Ferrari posted better-than-expected fourth-quarter earnings yesterday, generating nearly $5 billion in revenue in 2021 and saying they “have the strongest-ever order book” in their 80-year history.
CEO Benedetto Vigna says Ferrari has orders that will stretch “well into” 2023.
The stock ($RACE) is up 70% from its pandemic low and 262% over the last five years, handily beating the 100% return that the S&P 500 has seen over the same time.
Here’s a breakdown of how the business has grown year over year.
“Revenues from Cars and spare parts were Euro 3,573 million (up 26.0% or 28.8% at constant currency), thanks to higher volume, strong enrichment of the product mix, together with the positive contribution from personalizations.
The increase in Engines revenues (Euro 189 million, up 25.7%, also at constant currency) was attributable to higher shipments to Maserati and, to a lesser extent, the rental of engines to other Formula 1 racing teams.
Sponsorship, commercial and brand revenues reached Euro 431 million, up 10.4% or 12.9% at constant currency(1) mainly attributable to the more favorable Formula 1 calendar and brand-related activities, partially offset by lower prior year Formula 1 ranking.”
In simple terms, Ferrari sold more cars, engines, sponsorships, and merchandise.
And here’s a historical look at Ferrari financials, as well as guidance for 2022.
Ferrari is an interesting case study for a few different reasons.
They are one of the most iconic brands globally, even when you step outside the automotive industry, and would most definitely still have a solid foundation of customers even if they decided to hike their prices by a multiple of five.
Ferrari Annual Shipments
The fundamentals are strong also. Ferrari spent a decade delivering between 7,000 and 8,000 cars annually, but crossed over 11,000 deliveries last year, saw revenue and EBITDA grow 23% and 34%, respectively, and have 36% margins.
Sure, the world’s largest car manufacturers sell millions of cars annually, but for a luxury brand that famously controls its supply & reputation by producing only a limited number of vehicles each year, hitting ~$5 billion in annual revenue isn’t bad.
The interesting part to me is watching how this plays out long-term.
I think most people agree by now that through government policy and technology development, we are quickly shifting to a world that prioritizes electric vehicles.
Tesla is nearly a trillion-dollar company. Ford just committed to spending $20 billion to accelerate their shift to electric vehicles, and countries like Germany have even said they plan to ban any internal combustion engine (ICE) cars from 2030 onwards.
And most luxury car manufacturers have seen the writing on the wall also.
Rolls Royce and Bentley say that all of their vehicles will be electric by the end of this decade, and Porsche expects at least 80% of its vehicles sold globally to be partially or fully electric by 2030.
This isn’t to say that Ferrari has been entirely asleep at the wheel.
The Italian luxury car manufacturer is scheduled to release its first fully electric car in 2025. Still, they haven’t revealed a detailed strategy regarding its electrification plans, and many investors are starting to get worried they might fall behind.
Look, Ferrari is Ferrari. There is a reason why Formula 1 pays them a reported $35 million annually just because of their historical significance to the sport. They have over 400 million fans worldwide, and they sell billions of dollars in branded merchandise each year.
Enzo Ferrari famously said: “Ask a child to draw a car, and certainly he will draw it red.”
My point is that the brand is iconic, and they will have a customer base regardless.
But innovation happens quickly, and you don’t want to get left behind.
I hope everyone has a great day. I’ll talk to you tomorrow.
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