Are Ferrari Shares a Good Investment?

New York Stock Exchange
Ferrari set to float on the NYSE.

Millions of people have dreamed of owning a Ferrari – but for real car lovers with money to spend owning a piece of the company is a whole other level of investment. Fiat Chrysler revealed plans to list 10 percent of its stake in Ferrari on the New York Stock Exchange last fall and in July 2015 filed documents with the SEC ahead of an IPO expected to come in early 2016.

Ten percent of shares will still be owned by Piero Ferrari – son of iconic Ferrari founder Enzo and the rest by existing Fiat Chrysler shareholders. The sale of shares is thought to be designed to fund Fiat Chrysler’s global expansion plans – they currently ship around 4.5 million vehicles a year and hope to grow this to 7 million by 2020.

So if you’re a huge Ferrari fan or just a keen investor, what should you make of this investment opportunity?

Are Ferrari Shares a Good Investment?

Let’s look at the positives – Ferrari is one of the world’s most desirable and exclusive brands. Through its glamorous history, iconic designs, affiliations with Formula 1 and with the lifestyles of the rich and the famous Ferrari has become the ultimate status symbol. This type of global brand affinity is priceless and ironically makes a product that is very exciting and dynamic also quite reliable and dependable.

Financially Ferrari is a very successful company. Despite producing only 7000 cars a year they generated $3 billion in revenue with a profit of $423 million. As luxury cars continue to prove a fantastic investment (see our many posts covering luxury car investment for more details) – sales prices and demand should continue to rise.

On the negative side some of Ferrari’s strengths can also be seen as weaknesses for a potential investor. It’s exclusive, yes. It’s an incredibly desirable brand, yes. Although Ferrari has done a decent job in growing demand in different regions – to maintain their exclusivity Ferrari are never going to expand production beyond a certain, relatively scarce level. They have, however, attempted to diversify revenues with licensing such as video games and the Ferrari World Resort in Abu Dhabi.

The popularity of the Ferrari brand also means shares will be in great demand, inflating the share price and making ownership more about status than investment. Early estimates suggest a $10 billion valuation for Ferrari – an eyewatering amount that is largely about the prestige of the brand.

It’s still early days, meaning as new information emerges the attractiveness of the investment may change, but whatever happens the opportunity to invest in Ferrari as a company is an exciting one and we will keep you up to date.

Investing in Ferraris

So the final question to answer – what’s a better investment – a Ferrari share or a Ferrari car?

The price of vintage Ferraris has increased seven-fold over the last decade – we’ve seen and covered some of the record-shattering sales of Ferrari cars on Appreciating Assets – including a 250 GTO Berlinetta that went for $38million in August 2014. The luxury car market has been heating up for a long time – and inevitably there is debate about whether it will sustain. Back in the 1990s the luxury car market saw a spectacular crash before recovering in the 2000s and of course a luxury car requires care and attention to keep it in the best shape – which does not always come cheap.

Investing in the car may be more of a gamble – but also has the potential for big rewards – and although there will be kudos in owning Ferrari shares, you can’t drive them down the street to admiring glances.

About the Author:

Joe wrote about luxury asset trends for Borro Private Finance.