Photographer: Akos Stiller/Bloomberg

Ferrari Shares Beat Tesla as Higher Supercar Output Lifts Profit

  • Surge has been overshadowed by Tesla’s gain in market value
  • Ferrari CEO Marchionne mulling wider lineup beyond supercars

While Tesla Inc. grabbed headlines this week by becoming America’s most valuable carmaker, it’s Ferrari NV that’s been rewarding shareholders the most lately, with a 74 percent surge in the Italian company’s stock price over the past year.

Ferrari’s gain has been driven by earnings that exceeded expectations as Chief Executive Officer Sergio Marchionne increased production of higher-margin, special-edition supercars, like the $2.1 million LaFerrari Aperta convertible. That compares with a 25 percent increase for Palo Alto, California-based Tesla, which has capitalized on investor enthusiasm for founder Elon Musk’s vision of a future dominated by electric vehicles.

Tesla and Ferrari have at least two things in common: Their valuations are much higher than peers, and both are embarking on crucial expansions of their business models. Tesla is going into the mass-market segment with its Model 3 sedan, while Ferrari, which went public in an initial public offering in 2015, is mulling a move beyond its traditional supercars to attract new customers.

“Investors have been discovering Ferrari and its ability to boost margins since the IPO, while Tesla, which benefits from being seen as the front-runner in the electric market, still needs to show it can generate adequate profits,” said Vincenzo Longo, a strategist at IG Market in Milan.

Tesla has yet to report a profitable year, while Ferrari earned 425 million euros ($450 million) in 2016. That compares with multibillion-dollar profits for mass-market carmakers: General Motors Co. expects to earn more than $9 billion this year and analysts predict Ford Motor Co. will have profit of $6.3 billion. Tesla this week briefly became the largest U.S. automaker by market value, with a capitalization of $50.3 billion. Ferrari, which was spun off from Fiat Chrysler Automobiles NV, has a $13.6 billion market value.

Relative to earnings, Tesla’s valuation is about 10 times Ferrari’s. The Italian carmaker trades at 26 times next year’s estimated profit, versus Tesla’s multiple of 257. Large-capitalization car companies on average have a price-earnings multiple of 7.8, according to data compiled by Bloomberg.

Ferrari unveiled in March the 812 Superfast, the speediest production car in its history, as the Italian manufacturer pushes the limit of how many autos it can sell without losing its allure. Marchionne, likely to reach his target of selling 9,000 cars annually by 2019, is pushing high performers like the 812 Superfast to maintain earnings momentum, even as he widens the lineup. The CEO is considering more hybrid models and less-powerful vehicles, including a version with a V6 engine.

The company, which previously limited production to 7,000 vehicles annually to protect its image as a superluxury brand, sold 8,014 in 2016 and expects to sell about 8,400 this year. Ferrari is on its way to 1 billion euros in earnings before interest, taxes, depreciation and amortization this year, Marchionne said in an interview in March. The 64-year-old CEO may provide more details on strategy Friday at Ferrari’s annual shareholder meeting in Amsterdam.

“We believe Ferrari is about to embark a growth phase as we see potential for volumes to double in a decade,” Michael Tyndall, an analyst at Citigroup Inc., wrote in a note to clients March 23 as he upgraded his recommendation on the stock to buy.

Tesla delivered fewer than 80,000 vehicles globally last year. Its more-affordable Model 3 sedan, scheduled to roll out later this year, will be critical to CEO Musk’s ambitions for Tesla to transform from niche carmaker into a mass-market manufacturer. At last count the carmaker had reservations for about 373,000 Model 3s.

“Ferrari and Tesla represent two different ways on how the auto industry is evolving, and they can easily coexist,” said Massimo Vecchio, an analyst at Mediobanca in Milan. “The person who buys a Ferrari does it not just for moving from one place to another in an eco-friendly way: He does it for passion and the fun of driving a supercar.”