Luxury cars are items of aspiration and status, but does that apply to the makers themselves and are their shares as desirable as the products?
Next week should give some clues as three of Europe’s top luxury car marques report and Jefferies (and Deutsche Bank) have kicked the (expensive) tyres of Porsche, Ferrari (NYSE:RACE) and Aston Martin to see which pass muster.
The US bank expects the news overall to be good.
“From sustained demand for exclusive cars to environmentally questionable concessions on the use of e-fuel, European luxury autos had a good quarter,” says the broker.
The snag is that maybe with the exception of Aston Martin, the share ratings are almost as heady as the prices of the cars themselves.
First up is Aston Martin Lagonda and its quarterly numbers on 3 May should confirm the improvement being flagged by a rebounding share price.
Shares in the market are 242p currently having risen 150% in the last six months.
Deutsche Bank sees slightly higher wholesale volumes and higher selling prices (ASP), helped by the new DBX SUV, which should feed through into a slightly higher operating margin.
“Overall, we forecast an OK start to the year and no change to the outlook for 2023.”
Jefferies sees AML benefiting from the strength of demand and pricing for luxury cars currently.
“We assume 1,210 units sold (+4% year-on-year at £181,000 ASP,) for revenue of £279mln.
“Cost performance is still lagging, at least until replacement of front engine cars in the second half and we assume gross margin will remain slightly below 33%, underlying profits [EBITDA] £41mln, EBIT loss £(49)mln, with FCF negative (£106) mln."
Aston Martin is also getting some reflected glory from the resurgence of its F1 team.
AML sees success on the track as a way of building its brand even if it is commercially separate from the racing arm
Jefferies however says while the F1 results might improve sentiment it will have no impact yet on trading.
'Underperform" with a 160p target is its view, while Deutsche Bank is a holder with a 155p fair price estimate.
Germany-listed Porsche is a hold for Jefferies (target €105), though it notes that sales have been strong recently with deliveries up 18% year-on-year to 80,767 or around 5% ahead of forecasts.
First quarter revenues are forecast at €9.85bn, underlying earnings (EBIT) €1.76bn with estimates for the full year raised by 7-8% on the back of the current good momentum
“We continue to see Porsche as a case of hybrid valuation mixing 911, where we assume margins around 25%, and a premium range at 15-16% or 12-13% after expensing R&D only marginally higher than Mercedes”.
Ferrari (NYSE:RACE), meanwhile, increasingly looks like a "comfort" stock according to Jefferies but is well backed by earnings and sustainability metrics.
“{The first quarter] should set Ferrari well on track to meet or exceed the upper end of its annual guidance even if the mixed start to the F1 season has removed a potential source of upside”.
The bank is forecasting 3,550 units, up 9% including a few Daytonas at average unit revenue €340,000 and revenue €1.38bn, +16%, gross margin slightly below 50%, EBITDA €509m and EBIT €364m.”
Hold with a price target is the Jefferies view with a price target of €235.
“With shares trading on 8.6x revenue, 28x EBIT, 47x cash R&D earnings and 54x FCF, we don't have much to add to the valuation debate either way.”
Or alternatively posh car, posh share price.