CLOSING SHORT FERRARI

TAKING PROFIT OF +30.31%

We advocated selling on the IPO based on valuation, where we thought luxury multiples were inappropriate and organic growth unrealistic to achieve.

In the meantime we have been through a period of multiple contraction for luxury names thanks to Chinese, US and tourism weakness.

Also fears in the auto space of peak cycle sales and the effects of tightening credit on sales. Numbers where a big miss and proved the multiples where unjustified.

All these factors have created a perfect storm for our bear.

We are happy with our 30.31% return and tactically cover our bear.

 

UPDATE: SHORT FERRARI
STILL OVERVALUED; STAY SHORT INTO NUMBERS

Wednesday • 28 October 2015 • 17:08

STILL OVERVALUED; STAY SHORT INTO NUMBERS

Yesterday, RACE released preliminary results showing a big miss in Q4 revenues (€685M vs est. €743M). This is very well possible as Ferrari has been constantly valued at the combination of the luxury goods and luxury cars multiples.

On the relative basis we believe that RACE is still overvalued compared to its peers, trading at 24.16 vs industry average of 14.86x.

Also, we do not see growth rate of 18.29% YoY sustainable over L-T. As we wrote in our original idea that ” marginal buyer being the Chinese we however have the view that Ferrari will not be able to generate sufficient organic growth in the future”. We still hold this true, and do not see the room for sufficient organic growth for Ferrari.

We are currently up +22.9%, and feel that stock has room to slide another 10%-15%.

STAY SHORT into numbers.

 

FERRARI: SHORT
TRADING ON LUXURY MULTIPLE DESPITE BEING AN AUTO

Wednesday • 28 October 2015 • 17:08

We have been following FIAT and Ferrari closely pre-IPO and played it through FIAT on the long side into the event hype with success.

It IPO’d on a luxury multiple and in fact higher than that given what has happened to luxury multiples this reporting season. This despite being an auto!

Its an auto (bad in this environment) trading on a luxury multiple (which themselves have come into question this quarter).

The bull case is they increase production to 10k cars a year.

The marginal buyer being the Chinese we however have the view that Ferrari will not be able to generate sufficient organic growth in the future.

We are happy to short here and once we see the psychological level of 52 broken (IPO price) we are looking for a PT of $44 as fair value.