RACE: New Buybacks And Dividend Plans Will Support Premium Sector Outperformance

Ferrari’s analyst price target has been adjusted lower by approximately $10, as analysts cite cautiousness over higher fixed costs and sector headwinds. Analysts maintain continued confidence in the company’s premium positioning and robust business model.

Analyst Commentary

Recent street research reflects a wide range of views on Ferrari’s outlook, driven by changes to price targets and ratings amid shifting sector dynamics and expectations for the company’s execution. Analysts highlight both strengths and potential risks in Ferrari’s business model and market environment.

Bullish Takeaways

Bullish analysts continue to emphasize Ferrari’s premium brand and robust business model. They view the company as well-positioned within the luxury automotive sector.
There is significant optimism that higher-priced Special Series volumes and price/mix improvement opportunities will drive further top-line growth.
Several major institutions expect upcoming product launches to support Ferrari’s ability to meet or even exceed 2030 targets ahead of schedule.
Share buybacks, strong cash flow generation, and increased dividend payout ratios are seen as supporting shareholder returns and valuation resilience. This is particularly noted as Ferrari differentiates itself from mainstream carmakers.

Bearish Takeaways

Bearish analysts highlight persistent headwinds, including potential increases in fixed costs over the next two years, which could pressure margins in the near term.
Sector-wide challenges such as tariff risks, foreign exchange volatility, and evolving emissions regulations in Europe remain sources of uncertainty for execution and profitability.
Some firms have lowered their peer valuation benchmarks or applied discounts relative to ultra-luxury peers. They cite the need for Ferrari to restore investor confidence after muted third-quarter expectations.
Cautious analysts also point to adjustments in longer-term targets and estimates, reflecting a more prudent outlook on capital allocation and the pace of electrification within Ferrari’s strategy.

What's in the News

Ferrari plans to release a new digital token for its wealthiest customers to participate in an exclusive Ferrari 499P auction. This move aims to tap into the rising interest among younger tech entrepreneurs (Reuters).
The company has completed the repurchase of 5.62 million shares, representing 3.12% of outstanding shares, under its ongoing buyback program announced in 2022.
Ferrari's Board of Directors has authorized a new buyback plan and share repurchase program, allowing up to €3.5 billion in repurchases.
A proposal to increase the dividend payout to 40% of adjusted net profit from 2025 has been made. This could result in a cumulative payout of about €3.5 billion between 2027 and 2031.
Ferrari revised its earnings guidance for 2025 upward and now expects net revenues of at least €7.1 billion. The company also confirmed long-term guidance targeting €9.0 billion in revenues and an EBIT margin of at least 30% by 2030.

Valuation Changes

Fair Value Estimate has declined slightly, moving from $466.27 to $456.37.
Discount Rate has risen marginally from 14.52% to 14.56%.
Revenue Growth Assumption has edged down, now at 6.52% compared to 6.53% previously.
Net Profit Margin has decreased fractionally, from 23.64% to 23.63%.
Future Price/Earnings (P/E) Ratio Estimate has fallen modestly from 51.45x to 50.94x.

Expanded infrastructure and new models, including electrics, aim to boost revenue and margins through enhanced production flexibility and personalization.
ESG initiatives and brand visibility investments enhance long-term growth and profitability by aligning with consumer trends and fostering engagement.
A potential oversaturation from new model launches could dilute brand exclusivity, while supply and economic challenges threaten brand desirability, margins, and diverse growth.

Catalysts

About Ferrari

Through its subsidiaries, engages in design, engineering, production, and sale of luxury performance sports cars worldwide.What are the underlying business or industry changes driving this perspective?

Ferrari's expansion of infrastructure and product offerings, including the new e-building and paint shop for enhanced personalization, is expected to increase production flexibility, supporting revenue growth and improved net margins through operational efficiencies.
The launch of six new models in 2025, including the anticipation of the Ferrari full electric, is likely to drive revenue growth, capturing both existing and new customers while expanding Ferrari's electrification journey.
Continued focus on personalization, expected to remain around 20% of car and spare parts revenues, enhances the revenue stream due to the higher profit margins associated with bespoke options.
Investment in lifestyle activities and brand enhancement, alongside new racing sponsorships, is intended to foster brand visibility and engagement, contributing to revenue growth and maintaining high profitability margins.
Efforts toward carbon neutrality by 2030, including significant reductions in Scope 1 and 2 emissions through renewable energy use, are expected to support long-term earnings growth by aligning with increasing ESG initiatives and consumer preferences.

Ferrari Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Ferrari's revenue will grow by 8.0% annually over the next 3 years.
Analysts assume that profit margins will increase from 22.8% today to 23.8% in 3 years time.
Analysts expect earnings to reach €2.0 billion (and earnings per share of €11.45) by about March 2028, up from €1.5 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 63.6x on those 2028 earnings, up from 48.7x today. This future PE is greater than the current PE for the US Auto industry at 18.2x.
Analysts expect the number of shares outstanding to decline by 0.6% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 15.78%, as per the Simply Wall St company report.

Ferrari Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The influx of 6 new model launches in 2025 might lead to market confusion and dilution of brand exclusivity, potentially impacting the pricing power and overall brand desirability, which can influence net margins.
Concerns regarding the sustainability in demand, specifically related to electric and hybrid car residual values, could lead to decreased customer confidence and pressure on future sales revenues.
The observed trend of 81% of sales being attributed to existing customers raises questions about customer base diversity, which could limit revenue growth if this trend continues.
The ongoing supply chain challenges might impact production efficiency and lead to increased costs, posing a risk to net margins and earnings.
Changes in global economic conditions and potential tariff implementations could necessitate strategic pricing adjustments or impact market allocation, thus affecting revenues and profit margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $507.278 for Ferrari based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $597.04, and the most bearish reporting a price target of just $397.31.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €8.4 billion, earnings will come to €2.0 billion, and it would be trading on a PE ratio of 63.6x, assuming you use a discount rate of 15.8%.
Given the current share price of $449.56, the analyst price target of $507.28 is 11.4% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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