Tesla is no longer Morgan Stanley’s top US carmaker pick – Ferrari is
TESLA Inc is no longer the favourite US-listed automaker of Adam Jonas, the Morgan Stanley analyst who has been a long-time bull on the electric vehicle maker.
He now prefers Italian luxury-car maker Ferrari, saying it has the “longest order backlog, greatest earnings visibility and highest pricing power of any company we cover”. The maker of six-figure supercars like the new 390,000 euro (S$558,100) Purosangue crossover has a “near unmatched brand” and is a defensive name in the sector amid macroeconomic uncertainty and a consumer squeeze, he added.
Ferrari’s US-listed stock has gained 61 per cent since a low in June, and got a recent boost after the company raised its outlook amid strong demand from wealthy customers for its high-margin models.
Shares in Tesla have rallied this year, but are still down 51 per cent from a 2022 high. The Elon Musk-led company had a tumultuous year amid Musk’s takeover of Twitter Inc, investor jitters about growth assets and concern that high inflation and rising interest rates will dampen demand for EVs.
Jonas raised his price target on Ferrari’s US-listed stock to US$310 from US$280, implying 14 per cent upside from Friday’s close. His overweight rating – which he has held since May 2019, according to data compiled by Bloomberg – is one of 13 firms that rate the shares a “buy” or equivalent; seven analysts rate Ferrari “hold”, and three recommend “sell”.
The analyst has also rated Tesla overweight since November 2020. He has been gradually lowering his price target on the stock since June, but said in December that Tesla’s 2022 de-rating provided a buying opportunity in a year of a “reset” for the EV market.
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In today’s note, Jonas acknowledged that Ferrari shares are expensive compared to most other automakers – at 22 times his 2024 Ebitda estimate – but pointed out that they trade at a discount to Hermes International, maker of the Birkin bag and other high-end leather goods.
Ferrari also has underestimated opportunities tied to EV and new models, while investor concern about what the shift to EV means for Ferrari’s brand is misplaced, Morgan Stanley said.
The carmaker is preparing to add a hub for battery-powered cars in its historic factory in northern Italy, with the first fully electric Ferrari due to be unveiled in 2025. Three hybrid models accounted for 22 per cent of shipments last year.
“Building on their learnings from hybrid and applying the racing DNA, we believe Ferrari can offer an EV that will be just as high in demand as what investors are used to from internal combustion engines,” Jonas wrote. BLOOMBERG
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