Ferrari has been tasked by its Fiat Chrysler Automobiles parent to convince investors it can be seen more as a high-flying luxury goods provider than an automaker in time for this year’s initial public offering.
Sergio Marchionne, the chief executive of Fiat Chrysler Automobiles is a well known automotive expert – pulling off business feats few saw possible just a few years ago – but his plans laid out for Ferrari still bring questions from analysts and industry observers. “Ferrari is capable of being a fully-fledged luxury brand,” commented Marchionne just last month – hinting that he targets the same kind of high-end valuation multiples attained by established names such as LVMH and Richemont. The 62-year-old predicts Ferrari is worth up to 10 billion euros ($11.3 billion), with the initial public offering (IPO) scheduled for the first part of the year. He will only offer 10 percent of the company’s shares in the IPO so his hopes are very high for a big cash boost – needed for further investments into the group’s own ambitious five-year strategy.
Ferrari has an unmatched Formula One pedigree, delivers exclusive products such as the 1 million euro LaFerrari and has limited production to ensure its clients will be eager to wait a healthy period of time. It also saw profit nearly tripling during just 10 years and has a great earnings margin of 14 percent – only Porsche beats them when carmakers are taken into the equation. But if we judge those margins on a larger scale, companies such as Prada – with 26 percent – are well in front. Additionally, owing to the high-tech industry’s rising costs, expenditure on research and development are more than double those seen by other European luxury stocks.