Ferrari investors weren’t surprised by the news that the Italian luxury supercar maker finally revealed its long-awaited first SUV, but shares nonetheless posted solid gains after slipping recently.
Shares were trading at just over €200 late Thursday, up from €190 a few days before the news, as investors enjoy the huge profit margins expected in the Purosangue market. Eyebrows must have been raised in some green neighborhoods despite this talk of massive 6.5-liter petrol engines, V-12 and more than 700 horsepower, and not mentioning a carbon dioxide (CO2) footprint.
Investors hope Ferrari’s electrification plans outlined earlier this year will ease that kind of pressure. Ferrari has said it will launch its first fully electric car in 2025 and expects it will make up 5% of sales at that time and 40% in 2030. Gasoline/electric hybrids will make up 40% in 2030 with the rest of the internal combustion engines (ICE) . Ferrari is expected to offer hybrid versions of the Purosangue.
Investment bank UBS said Purosangue’s base price of 390,000 euros ($390,000) was about 40,000 euros higher than expected.
“It is far superior to most luxury SUVs currently on the market, as Ferrari continues to prioritize growth through value rather than size,” UBS said.
Other expensive SUVs include Rolls-Royce Cullinan, Bentley Bentayga, Lamborghini Urus and Aston Martin DBX.
Ferrari said quantities will be limited to about 3,000 Purosangues per year.
“We believe the launch of Purosangue will create more excitement around the brand and have a positive impact on the rest of the portfolio as well. In our view, the higher ticket price compared to other automakers reinforces Ferrari’s position in the ultra-luxury segment, while the volumes contained enhance the brand’s exclusivity, which is An ideal strategy for long-term sustainable growth.
“The price is, crucially, about 30% higher than Ferrari’s average selling price and thus contributes positively to the mix. It will also likely lead to increased customization content, which positively impacts margins. We do not rule out the possibility that Ferrari will expanding the scope of Purosangue by introducing hybrid versions in the near future,” UBS said.
Reuters’ BreakingViews said Purosangue would allow Ferrari to have a stronger presence in SUV-loving China, which accounts for just 10 percent of sales.
Bernstein Research was also impressed by China’s potential and considered the launch of Purosangue to be pivotal in maintaining Ferrari’s stock price valuation as a luxury-goods stock, rather than a regular automaker. I expected many variations on the theme of Ferrari’s first SUV.
Ferrari shares are priced comparable to luxury-goods manufacturers like Hermes, LVMH, Prada, Ferragamo, Moncler or Richemont with their massive profit margins, rather than the likes of Volkswagen or Stellants.
“The Purosangue, and any V6 or V8 variants, are key to maintaining and evaluating Ferrari’s growth profile. Investors are looking for higher trading volumes, especially in China, without significant brand dilution. This will help reduce potential risks associated with Ferraris electrification strategy,” Bernstein said in a report. .
“The Purosangue cannot be a single pony – investors are waiting for more variables. These will generate the volumes and prices needed for growth beyond 2026. We believe the launch of the Purosangue will be a pivotal moment in Ferrari’s recent history, but only as a symbol of the luxury car company’s future prospects.
Ferrari said it expects annual earnings measured by EBITDA (earnings before interest, tax depreciation and amortization) to accelerate to 2.7 billion euros ($2.84 billion) in 2026 from 1.5 billion euros ($1.58 billion) last year.
Investment bank Goldman Sachs last year shifted its investment recommendation to “sell” from “buy,” citing the huge cost of embracing electric power, and the difficulties in replicating its large profit margins.