A Second Chance at Ferrari Profits
On June 12, I published a Trade of the Day titled “Calling On Our Resident Car Expert.”
The article featured the rapid growth of Ferrari (NYSE: RACE).
At the time, I wrote, “I’ve never traded it… but it intrigues me.”
So to get a better handle on Ferrari, I consulted our very own car expert, Karim.
You see, you may not know this, but Karim worked in a performance car shop during his summer holidays in college, where he learned which cars were made well – and which were not.
He concluded that Porsches are built to last – telling me that they’re pretty much the only car you can take from the street to the track and back to the street again without doing a thing.
He would know, too…
He’s owned three Porsches – and he’s getting ready to pick up another one for the fall driving season. So when I came to him asking about cars – and specifically about Ferrari – I knew I could count on his expertise.
Ferrari is one of the truly unique brands that capitalizes on its “wow” and “rarity” factors. Its classic and limited-production cars are the highest-priced sellers at auctions. Its sales are off the charts, and it has very strong fundamentals. Revenues are still growing (albeit at a lower rate), but net income continues to grow impressively.
At the time, I knew I wanted to play Ferrari, but I wanted to wait for a pullback before entering. After all, I never like buying such a rapid upside chart.
Here’s what I said back in June…
If we see a pullback to around the $145 level, we could have a possible entry point. The $145 level is the last instance where resistance turned into support.
Fast-forward to today…
As you can see below, Ferrari did indeed pull back to this $145 support level in early October. And ever since, it’s been shooting higher – recently touching $170.
The bounce was fueled by earnings – as Ferrari reported in early November that its earnings rose 11% to 0.90 euros per share in Q3 while revenues increased 4% to 915 billion euros. Since analysts had expected Ferrari to post earnings of 0.84 euros on sales of 901 million euros, this was a strong beat.
Looking ahead, Ferrari now expects 2019 earnings per share of 3.70 to 3.75 euros, which is up from its previous guidance of 3.50 to 3.70 euros. The company also raised its 2019 revenue outlook to 3.7 billion euros from its previous 3.5 billion euros.
Action Plan: If you missed the pullback to $145, we must now increase our next buy target. Specifically, a pullback to $160 is your next buy spot.
You don’t want to miss the next pullback, do you?
I didn’t think so, which is why you should join me in The War Room today!