Ferrari Group initiated at "buy" by Goldman Sachs, Jefferies on growth potential

Investing.com -- The Ferrari (BIT:RACE) (NYSE:RACE) Group (AS:FERGR), a key player in the niche luxury logistics sector, has attracted analyst coverage from leading financial institutions, with Goldman Sachs and Jefferies both initiating their coverage of the company’s stock. 

Their respective analyses flag the company’s strong position within the high-value freight forwarding industry and its significant growth potential.

Ferrari Group specializes in logistics for high-value luxury goods, including jewelry, watches, and diamonds. 

This segment, though a small fraction of the global logistics industry, represents a lucrative niche, with the company commanding more than 10% market share according to estimates from Goldman Sachs. 

The company operates a strong global network spanning 64 countries, handling over a million air freight shipments annually, transporting goods valued at over €170 billion.

Jefferies emphasizes the company’s competitive advantage through its integration of freight forwarding, warehousing, and security services, positioning Ferrari as a "one-stop-shop" for luxury brands. 

Unlike traditional logistics providers, Ferrari’s fee structure is linked not just to weight but also to the value of the goods, yielding significantly higher margins.

Both analysts foresee strong financial performance for Ferrari Group, with projected revenue growth of approximately 6%-8% annually, nearly double that of broader logistics peers. 

Goldman Sachs projects an adjusted EBITDA CAGR of 7% between 2025 and 2029, aligning Ferrari’s revenue trajectory with the broader hard luxury market. 

Meanwhile, Jefferies forecasts an even stronger EBITDA growth of 8% per year beyond 2024, driven by revenue expansion and improving profitability.

The company’s strong cash flow generation is a central theme in both reports. Goldman Sachs highlights Ferrari’s ability to maintain robust free cash flow yields, with estimates suggesting an FCF yield of 7.7% by 2026. 

Jefferies further notes that the company’s FCF conversion rate is expected to rise from 43% in 2024 to 54% by 2027, strengthening its net cash position to €228 million by 2027.

Goldman Sachs initiates coverage with a "Buy" rating and a 12-month price target of €13.40, implying a 67% upside from the last closing price. 

The brokerage attributes this target to Ferrari’s growth prospects, cash generation, and significant valuation discount compared to global logistics peers.

Jefferies, while similarly positive, sets a more conservative price target of €10.50, reflecting a 26% upside. This valuation is based on a 20% discount to its DCF-based fair value estimate of €13. The brokerage argues that as Ferrari builds a stronger track record in public markets, this valuation gap could narrow.

Ferrari Group’s differentiation within luxury logistics is underscored by both reports. The company operates in a highly fragmented market, with the top six players controlling only around 20% of the industry. 

Ferrari leads this space, holding more than 8.5% market share, well ahead of competitors such as Malca-Amit and Temis Luxury.

The company benefits from high barriers to entry, thanks to its deep customer relationships, strong brand reputation, and regulatory expertise in handling luxury goods. 

This enables Ferrari to sustain its high-margin business model, which is nearly twice as profitable as traditional freight forwarders.

Goldman Sachs emphasizes Ferrari’s IT-driven productivity improvements and operational efficiencies, which are expected to drive incremental margin gains beyond the already strong 26% EBITDA margin forecast for 2024. 

Jefferies sees further upside through geographical expansion into emerging luxury markets, particularly in Asia, where demand for high-value logistics is growing at a faster pace than in Europe or North America.

However, both brokerages acknowledge certain risks. Liquidity concerns due to the company’s smaller market capitalization could limit stock movement in the near term. 

Additionally, macroeconomic pressures, such as fluctuations in luxury consumer demand and potential disruptions in the global supply chain, pose challenges to revenue predictability.