Ladies and Gentlemen, start your engines. Fiat Chrysler is planning to spin off Ferrari in an IPO valuing the maker of exotic vehicles at nearly $10 billion. Ferrari plans to offer 17.2 million shares at a price of $48 to $52 per share with the ticker appropriately named RACE.
That’s right, Fiat Chrysler, which brought us such gems as the P.T. Cruiser, the TC, the Crossfire, and who could forget, the Dodge Shadow, is spinning off a company that makes half a million dollar pieces of rolling art. It’s the automotive equivalent of Franza boxed wine spinning off Dom P. Forget the champagne, nothing says winner like driving a purple Dodge Shadow around town. O. K. man.
Currently, Fiat Chrysler owns 90% of the automaker, while the son of founder Enzo Ferrari, Piero, owns the remaining 10%. As part of the restructuring, Piero received 280 million euros in cash ahead of the listing. But the major shareholders of the newly traded company will still be the Agnelli family of Fiat fame.
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So Piero will have to hang out with eccentric heir to the Fiat throne, Lapo Elkann. As for Piero’s ability to rock hot pink fedoras, that remains to be seen.
Ferrari reported profits of $302 million last year on $3.3 billion in sales but only part of that comes from the 7,255 cars they shipped last year. A little over 10% of their revenue comes from contracted engine sales to Maserati. Another 17.6% comes from licensing of the legendary logo and name. Anytime you see those Ferrari fanboys covered in prancing horses, odds are they’ve never set foot in the car. Ferrari’s licensing partnerships include Oakley sunglasses, Puma shoes, Lego and Microsoft.
I’m guilty here, as I have a Ferrari branded wheel for my racing sim I have on my home computer. That’s right, more than just the beard, hashtag nerd game strong.
Another big chunk of the revenue is dependent on its Formula 1 team, Scuderia Ferrari. The team has won 222 Grand Prix races, 16 Constructor World titles and 15 Drivers’ World titles, making it the most successful team in Formula 1 history. In the prospectus, Ferrari warns that “If we are unable to attract and retain the necessary talent to succeed in international competitions or devote the capital necessary to fund successful racing activities, the value of the Ferrari brand and the appeal of our cars and other luxury goods may suffer.” With head driver Sebastian Vettel currently 2nd in points this year, the immediate future for Ferrari looks bright.
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The $3.3 billion in revenue puts it on par with Tesla’s (TSLA - Analyst Report)) $3.7 billion. The difference here being the huge growth opportunity in Tesla compared to the relatively stagnant production expansion at Ferrari. That difference amounts to Tesla having a market cap three times the size of Ferrari. To put that all into perspective, Ford (F - Analyst Report) has a market cap a little more than twice the size of Tesla at $60 billion on revenues of $142 billion a year.
While you’re waiting for your Ferrari to show up, the foreign auto manufacturer industry ranks in the Top 18% of our Zacks Industry Rank. Two stocks, Daimler (DDAIF - Snapshot Report) and Nissan (NSANY - Snapshot Report), are Zacks Rank #1 (Strong Buy) stocks while Toyota (TM - Analyst Report) is a Zacks Rank #2 (Buy).
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by David Bartosiak
Source:http://www.zacks.com/stock/news/193314/why-you-should-get-revved-up-for-ferrari-ipo
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