Etjon Dybeku & Nick Yamauchi

Prof. Ryan Ross

Ferrari Case

1. 1)  What are the financial implications of Ferrari’s current strategy?

There are a few important things to mention for Ferrari’s financial condition.
What needs to be taken in consideration is that before the IPO Ferrari was 90%
Fiat-Chrysler and 10% Ferrari. After the IPO, it was 81% Fiat-Chrysler, 10% for the
Ferrari family, and 9% was out there available for investment. One of the
financial implications for Ferrari is the fact that with the money they will raise
from the IPO they have to pay FIAT, and the money will get distributed to the
shareholders. This money will not benefit Ferrari’s shareholders.

2. I notice that the shipments rate will increase. According to the case, the
company will be present in emerging markets, and in addition the Asian market
(China) has been proving to be a great market for luxury and sports cars. Sales
have exceeded 20% in the last five years, and lately they sell 1.5 million cars/
year. That said, the car revenue also improve (per year). By 2019, the company
should be producing 9000 more units for China. In regards to the 10% total
revenue growth, I think it is understandable due to the payments owed to FIAT.
Comparing to 2014, the company has slower positive growth because of the
challenges and expansions on its own. Regardless the changes in Revenue
Growth, the company is keeping steady EBITDA margins.

2. What do you think Ferrari is worth in Euros? Justify your recommendation based
on current market multiples valuation and a DCF valuation.

52/1.1375 = 45.71 euros

Ferrari EPS  1.6

Car industry PE: min 4, med. 8.2, max. 15.4

Valuation: mmin $6.4, Med: 13.12, max. 24.32

4. The question to think about: Is Ferrari selling a car, an experience or a brand? Or what exactly
are they selling? The target market for Ferrari is very specific. As such, the few that afford buying
Ferrari are willing to pay the high price. There are very low barriers to buyers’ power. Ferrari
controls the price. Ferrari can sell at a high price. But as discussed in class, the stock price depends
on supply and demand. According to analysts in the case, Ferrari can very well be oversubscribed.
Based on the brand, and considering that 90% of those funds will go to FIAT, I would price
Ferrari at $52. It would generate about $893 million by selling the 17.175 million shares.