There are two astronomically valued auto stocks out there: Tesla, which makes quiet-driving electric vehicles, and Ferrari, which makes famously noisy racing cars.
The Italian company’s stock has more than tripled since its 2015 initial public offering and now fetches more than nine times expected sales, compared with five for Tesla. Ferrari’s premium is underpinned by very loyal customers who ensure a waiting list for deliveries and high margins. In 2019, the company sold 10,131 vehicles, 9.5% more than in 2018, while the operating margin rose slightly to 24.4%, according to results posted Tuesday.
The only bump on Ferrari’s road is Tesla, in fact. Even the ultimate racing-car brand feels pressure to improve its environmental credentials. It launched its first plug-in hybrid last year, the SF90 Stradale, with 25 kilometers (15.5 miles) of silent electric driving range, and it is looking at alternative fuels. The company even has a long-term ambition to achieve carbon neutrality.
The effort is proving extremely expensive. Research-and-development spending last year totaled €889 million ($984 million), equivalent to an extraordinary 24% of revenue, and the company expects to spend even more this year. Ferrari has been building its capabilities in house to “ensure our competitive superiority,” Chief Executive Louis Camilleri said Tuesday.
Just how much does Ferrari’s brand equity depend on the rumble of its internal combustion engines? It may not be too long before investors find out.
Corrections & Amplifications
Ferrari’s research-and-development spending last year totaled €889 million ($984 million). An earlier version of this article incorrectly stated the spending was €889 billion ($984 billion). (Feb. 4, 2020)
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https://www.wsj.com/articles/ferrari-wants-to-save-the-planet-too-11580841033
2020-02-04 22:04:00Z
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