Barclays upgraded Ferrari N.V (NYSE:RACE) to Overweight following the company's strong Q2 performance, highlighting it as a "prime stock to own" after the strong beat.
This decision comes after Ferrari beat EBIT consensus by 7% on August 1, achieving a record 29.9% margin and raising its FY24 guidance to over 27.5% from the previous 27%.
The bank notes that in the first half of 2024, Ferrari experienced numerous margin tailwinds, including a high number of Daytona Iconas (approximately 80 units), higher-than-average personalization, favorable regional mix from low China shipments, and a €10 million provision reversal.
These factors contributed to a 27.9% margin in Q1, leading analysts to maintain a cautious outlook. However, post-Q2 results have significantly altered this perspective.
Analysts note that all the positive factors from Q1 persisted into Q2. The quarter saw 74 Daytona Iconas, nearly 20% personalization (no longer considered above average), continued favorable regional mix, another €10 million provision reversal, and a new tailwind from net R&D capitalization.
This strong performance has alleviated analysts' previous concerns about Ferrari's ability to meet high expectations for Q2-24.
Despite a cautious outlook before Q2, analysts acknowledge that the margin tailwinds were stronger and more persistent than anticipated. The firm's volume-price-mix forecasts were consistent with results, but the overall beat was driven by lower costs.
While some may view the net R&D effect and provision reversal as lower quality, analysts believe the majority of the beat represents strong execution.
Given these developments, Barclays has raised its price target for Ferrari to €450. With H2 expectations well understood, Ferrari is now viewed as "among the best stocks to own into 2025" across Barclays' coverage universe.