Investors still haven't figured Ferrari out
Ferrari
At just 3% more than last year, that's a slower pace of growth than in 2015.
The stock got clobbered Tuesday, falling about 13% by mid-afternoon.
The drop shows just how hard it has been for investors to figure Ferrari out.
Ferrari isn't hard to understand as a company: It sells a small number of very expensive cars to an exclusive clientele. And for years, it has resisted expanding production to maintain that exclusive mystique.
For investors, the expectation is that Ferrari - which was spun off from Fiat Chrysler Automobiles in an IPO last year - will build and sell more cars each year.
But the carmaker isn't simply going to go from making about 8,000 cars in 2016 to building 12,000 in 2017. In fact, if 10,000 Ferraris ever appear in a single year, CEO Sergio Marchionne will likely be satisfied that he's pushed production as high as he can without tarnishing the halo of exclusivity that the brand requires.
So even though Ferrari has already decided to increase output, that increase has to be slower than investors want.
The trick now is to manage investor expectations to make sure they understand why. As a unit of FCA, the company didn't have to face obsessive scrutiny of its quarterly results that it now endures.
Growth isn't the only issue. It's also difficult to understand how Ferrari prices its cars.
For example, you might think that $250,000 is a lot to pay for the new 488 GTB, but if Ferrari wanted to raise prices by ... well, a lot more, Ferrari customers would gladly pay up. Once you decide to buy a Ferrari, you're not going to get hung up on the size of the check you need to write.
Investors who are probably getting burned right now as the ones who thought Ferrari would trade like a luxury goods brand, instead of as a automaker (a very unusual type of automaker). Ferrari debuted with a valuation (relative to earnings) that was three times what carmakers get and the selling on Tuesday and leading up to it could just be some of that hot air coming out.
The unfortunate thing, however, is that Ferrari's sterling brand is now bound up with its stock price. So while the old negative stories about Ferrari revolved around how you couldn't get or afford one, the new bad stories could crop up every three months and be about why shares aren't a great investment.
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