Ferrari: Slightly Raising Our Discount Rate in Line With Our More Granular Risk Assessment

Key Morningstar Metrics for Ferrari

• Fair Value Estimate
  : EUR 337
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Medium

Under the updated discount rate methodology, we raised our weighted average cost of capital estimate to 7.8% from 7.4%. The change does not reflect a new view of the business, but a more granular expression of our existing risk assessment.

Why it matters: The slight reduction in our WACC reduces our fair value estimate.

• The higher discount rate reflects a higher cost of equity on the more granular breakdown of the figure. We have made no other material changes to our model.
• Ferrari’s RACE preresults call confirmed that everything is on track to meet its previously communicated guidance for the full year. No additional information could be shared on the uptake of the recently launched Luce model—Ferrari’s first fully electric vehicle. Initial uptake will be shared at the half-year results.

The bottom line: We have reduced our fair value estimate to EUR 337 per share from EUR 370 and reiterate that there are no fundamental changes to our view of the company’s thesis.