How Ferrari's EV Future Could Lead To $350 Per Share: Analyst

Morgan Stanley analyst Adam Jonas released a note on Wednesday detailing how electric vehicles could drive Ferrari N.V. RACE shares to $350.

The Ferrari Analyst: Morgan Stanley maintained an Overweight rating on Ferrari with a $265 price target.

The Ferrari Takeaways: Valuing all parts of the business, less EV opportunities, Ferrari shares should be priced at $203, leaving little to no room for Ferrari's EV strategy, said Jonas in a Wednesday note.

Under the helm of newly appointed CEO Benedetto Vigna, Ferrari's future as an EV manufacturer looks bright, the analyst said.

Vigna's "deep technological experiences" makes him an ideal candidate for finding a balance between the vertical integration and outsourcing needed to operate in an EV future, Jonas said. 

As with many other OEMs, Ferrari's internal combustion offerings will begin to phase out following a shift to an EV production focus, said the analyst.

This shift will likely be gradual, yet Ferrari "may be one of the only surviving ICE car manufacturing companies in the world" with an inverse price/volume growth relationship, Jonas said. 

EBITDA margins are expected to rise to 35% and 42% by 2021 and 2040, respectively, according to Morgan Stanley. 

Jonas forecast Ferrari selling 5,000 ICE vehicles at an average price of $1.3 million and over 30,000 BEVs at an average price point of around $475,000 in 2040, totaling just over $23 billion in revenue. 

The bull case price estimate of $350 uses a 26x multiple on an estimated 2023 EBITDA of around $2.5 billion, assuming Ferrari surpasses guidance and Vigna can release a widely accepted roadmap of Ferrari's future, said the analyst.

Additionally, the market would need to price in the higher growth of future years, Jonas said.

RACE Price Action: Shares of Ferrari were trading 1.61% higher at $208.98 at last check Friday.