Barclays upgrades Ferrari to "overweight," citing strong guidance and stability

Investing.com -- Barclays has revised its stance on Ferrari (BIT:RACE), upgrading the stock’s rating to “overweight” from “equal weight” in a note dated Friday. 

This upward revision is primarily driven by Ferrari’s recent "commercial policy update". This update served to reinforce the company’s financial guidance, notably amidst the challenges posed by the 25% US tariffs on foreign car imports. 

Barclays (LON:BARC) analysts interpret Ferrari’s ability to affirm its guidance in the face of these tariffs as a demonstration of the company’s distinct resilience, solidifying its position as a relative safe-haven within the automotive sector.  

The upgrade follows a period of correction for Ferrari’s shares, which experienced a 20% decline from their peak on February 14th.

Barclays analysts now view this correction in the share price as presenting a favorable opportunity for investors to consider investment in the stock. 

It’s important to note that despite this adjustment, Barclays has maintained its price target for Ferrari at €485.  

Barclays’ overall assessment is that Ferrari’s confirmation of its financial targets, amidst the prevailing uncertainty within the EU automotive market, underscores the company’s unique safe-haven status. 

The recent correction in the share price is regarded as an opportune moment for potential investment.  

Ferrari’s response to the tariffs, which involves partially offsetting the impact through pricing adjustments, has been positively received by Barclays. 

The company has indicated that it will implement price increases of up to a maximum of 10%, with certain models and orders being excluded from these adjustments. This decision carries several positive implications, according to Barclays analysts.  

Firstly, it addresses and alleviates investor concerns regarding Ferrari’s pricing power, a subject that had been debated in the context of residual values. The ability to proceed with partial price increases signals a strong level of confidence in the brand’s strength.  

Secondly, Barclays analysts believe that the impact of the 25% tariffs on Ferrari’s margins is now assessed to be less severe than initially anticipated. 

The planned partial price increase is expected to result in minimal dilution of margins, indicating that the company has a lower sensitivity to the tariffs than previously expected.  

Thirdly, when compared to other EU OEMs, such as BMW (ETR:BMWG) and Mercedes-Benz (OTC:MBGAF), which had projected more EBIT margin sensitivities, Ferrari’s capacity to mitigate the tariff impact is viewed as a demonstration of greater relative resilience. 

Barclays suggests that Ferrari’s actions highlight its stronger position compared to its EU peers in navigating these challenges.  

Barclays also emphasizes that even in a scenario involving additional reciprocal tariffs, Ferrari’s limited sensitivity underscores its resilience within the EU OEM landscape.  

From a financial perspective, Barclays indicates a positive trajectory for Ferrari. The brokerage  projects growth across key metrics, including sales, gross profit, EBITDA, and EBIT, with corresponding margin improvements expected in the coming years.

Specifically, sales are projected to grow from €6,677 million in 2024 to €8,721 million in 2027, and EBIT is expected to rise from €1,888 million in 2024 to €2,810 million in 2027.

Additionally, EPS (reported) is forecast to increase from €8.47 in 2024 to €12.22 in 2027.