The electric vehicle arena has become crowded, and an analyst at Morgan Stanley has picked Italian sports car manufacturer Ferrari N.V. RACE as his favorite EV play.
The Ferrari Analyst: Adam Jonas reiterated the Overweight rating on Ferrari shares and raised the price target from $265 to $350, primarily factoring in better-than-expected third-quarter results and a higher average transaction price assumption for EV business.
The Ferrari Thesis: Ferrari's third-quarter results were significant because new CEO Benedetto Vigna provided valuable insights into the future of the company as it charts out its BEV strategy, Jonas said in a note.
The CEO said the company will unveil the full plan during its capital markets day on June 16, 2022, the analyst said. Vigna also sounded out his intention to leverage technical partnerships in key areas to de-risk the EV transition, he said.
Related Link: How Ferrari's EV Future Could Lead To $350 Per Share: Analyst
This apart, the company reported third-quarter results that featured all-time high revenues, cash flow and order intake, Jonas noted.
"Longer term, we see scope for Ferrari to offer a range of EV products at potentially higher prices than the average selling price of today's Ferrari, while leveraging economies of scale on higher volumes," the analyst said.
The analyst sees EVs as a trigger to unleash topline growth above Ferrari's historic averages. EV revenues at Ferrari will likely surpass ICE revenues by 2034 and account for 75% of the total revenues by 2040, the analyst said. Ferrari may be one of the only surviving manufacturers of ICE engine vehicles longer term, he added.
"The move to EVs is existential to Ferrari's long term growth and we are convinced it has the technical capacity and leadership to execute," Morgan Stanley said.
RACE Price Action: At last check, Ferrari shares were adding 3.34% to $266.48.
Related Link: Ferrari Unveils Hybrid SF90 Spider That Uses Electric And Combustion Motors
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