Ferrari’s stock price trades some 20 percent above its IPO price. That is certainly great, but the steep 100 percent rise since it bottomed last February is even more spectacular.
Ferrari’s headline figures are definitely as great as Ferrari’s stock price. It has a P/E ratio of 34x and an EPS of 1.92. There is plenty of cash on the balance, a very low short float ratio. The company keeps on growing and the outlook is good.
The key question is: should investors step in at this point?
First and foremost, the stock is trading near all-time highs, that always has a double meaning: it can either be strongly bullish or a major top. It basically depends on a combination of the following factors: ongoing chart pattern short and long term, strength in the sector, stock market strength, company fundamentals and high level financials.
When it comes to the automobile sector, we indicated already a while back that the Automobile Sector Looks Increasingly Constructive As 2017 Kicks Off. The sector is definitely strong. Stock markets, on the other hand, are at a potential inflection point, as explained in Global Stock Market Investors On High Alert In March 2017. The company fundamentals look certainly good, that is not the issue.
The rise of RACE has been very sharp, maybe too sharp. We believe Ferrari’s stock price has certainly upside potential, but if the sharp rising trendline gives away, there would be much better entry points, in either of the two other trendlines ($60 or $55).