By Michael Elkins
Morgan Stanley updated their coverage of Ferrari (NYSE:RACE) to reflect their positive expectations following the vehicle maker's Purosangue launch. Ferrari's Purosangue comes as the 2nd out of the 15 new models conceived in the company's ambitious product plan from the 2022 Capital Markets Day. Morgan Stanley reiterated an Overweight rating and $300 price target as they expect the launch to be a positive contribution to ASP and profitability.
The Purosangue, Ferrari's first ever four door production vehicle, is scheduled to start shipping in 2023. While not a 'numbered' limited edition vehicle, Morgan Stanley analyst, Adam Jonas doesn't expect Ferrari to sell more than 10 to 12k Purosangue units over its entire lifetime, preferring to prioritize scarcity.
Morgan Stanley updated their model to account for Purosangue's impact to ASPs. They are assuming a starting MSRP of €390K, adding a 13 to 15% personalization premium and a 10% gross margin at the dealer level. For the full year 23' Morgan Stanley estimates ~6.8% of units shipped will be Purosangue, helping to boost total company’s 2023 ASP to ~€337K (prev. ~327K). The updated model is ~120 bps accretive to 23' EBITDA margins and ~80 bps to 24' EBITDA margins. Diluted EPS forecasts increased 7% for FY23 (to €5.95), 9% for FY24 (€6.82), and nearly 10% for FY25 (€7.49).
Jonas wrote in a note: "To be clear, we do not in any way expect Purosangue to be more of a sizeable niche model within the Ferrari line-up. Ferrari has stated that Purosangue sales will, on average, contribute less than 20% of shipments over its lifetime. We would take the under on 15% of total Ferrari sales at this stage, not due to demand but more related to supply. Nevertheless, we view Purosangue as a valuable "proof-of-concept" when assessing demand for ultraluxury SUVs which Ferrari can further develop in full-electric/BEV form later in the decade where we think the segment will lend itself to an even higher performance and higher margin Ferrari vehicle."
Shares of RACE are down 2.64% in pre-market trading on Thursday.