Wall Street Loves Ferrari, And Sergio Marchionne Knows Why

In October of 2015, Ferrari held its IPO and became a publically traded company after nearly 70 years of being privately held.

Since then, the value of the automaker’s shares has swelled by nearly 98 percent. Its core business is also doing well, with sales up 6 percent year-over-year in the first six months of 2017 and profits up 43% from last year. But it’s not just strong marketplace performance that’s making Ferrari a darling on Wall Street. Investors are attracted to the company’s ethos of being a luxury brand that happens to sell cars and not just an automaker, chairman Sergio Marchionne recently told The Street in an interview.

“I think it has been confirmed by the performance of the stock in the marketplace, but more importantly the financial performance we’ve had since we’ve taken [Ferrari] public, that Ferrari as you know it isn’t a car-maker,” Marchionne said. “Ferrari happens to make cars, but it makes luxury goods for a select group of people who cherish belonging to an exclusive club for our users — that’s a different argument than making cars.”

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This approach to business makes Ferrari’s shares less risky than those of a typical automaker. Its overall performance isn’t hinged solely on the strength of the global automotive industry. The automaker operates two theme parks, Ferrari World in Abu Dhabi and Ferrari Land in Spain, and has plans to eventually open a park in almost every major geographic region it conducts business including North America and China. Ferrari-branded apparel and accessories are also big business, as is the Scuderia Ferrari Formula 1 team and its motorsport ventures.

“I think it would be really a crying shame if we did not find a way to extract additional value from a brand as unique as Ferrari,” Marchionne told The Detroit Free Press prior to its IPO in 2015. “Without impacting on the exclusivity and the uniqueness of the car brand, we need to find a way to build business around this to leverage it and use it properly.”

[Source: The Street]
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