Ferrari has Performed Well During the Coronavirus Pandemic
Although the pandemic affected the production and delivery of Italian cars Ferrari, it did not affect the demand of the wealthy to purchase them, analysts noted.
The financial impact of the Corona pandemic on Ferrari‘s performance so far appears to be just a quarterly profit drop, as the administration has managed to deal with the crisis, according to Bloomberg News.
According to the results announced by Ferrari on Monday, its revenues declined during the second quarter of this year by 42% annually, while the volume of deliveries decreased by 48%.
Production had declined sharply as a result of the closure of factories and distributors’ showrooms, as part of the measures imposed by most countries of the world to stop the spread of the new Corona virus.
In these circumstances, the company decided not to resort to reducing expenditures or investments and chose instead to continue paying workers’ wages and increasing the remuneration of distributors. Therefore, earnings per share declined by 95%, and their free cash flow also eroded.
At the same time, requests to reserve its new cars “remained strong as usual,” and the company said that the morale of its customers is very high, and this pandemic encourages the use of private cars for owners of all income levels.
Ferrari believes that many believe that buying one of its cars in these difficult circumstances is in itself a reward.
Bloomberg says there is a debate about whether Ferrari should be compared to other regular cars, or to fashion houses and luxury goods.
However, given its price power and its ability to control values and attract demand, it can be seen as belonging to the class of luxury goods companies rather than the world of ordinary cars. Therefore, the decline in Ferrari sales during the second quarter of this year, similar to the decline in sales of the French company Hermes International of luxury goods and slightly less than sales of Kering and Richmont of luxury goods.
Here, the value of Ferrari appears. Its share price has now increased by 5% compared to its level at the beginning of this year, while European stock indices as a whole have fallen by more than 10% during the same period.
According to the investment value, the value of the company’s shares is currently 20 times its estimated profits before calculating taxes and interest in the next year, while the rate for Hermes reaches 25 times, but the rate for the following company is 13 times, at best.
Bloomberg says that despite the resilience Ferrari has shown during the pandemic, it would be wrong if it believed the crisis would not pose a threat to its business. Perhaps some of the challenges arising from the crisis have yet to appear. Governments are currently looking for ways to finance the expenses of facing the Corona pandemic and its repercussions, and it is expected that they will impose new taxes on the wealthy who can buy Ferrari cars.
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