Why a Ferrari is like an Hermes Birkin bag
A Ferrari is the ultimate luxury purchase. They’re expensive, and very, very exclusive
Ferrari wants to forget it’s a car and pretend it’s a handbag. The maker of supercars wants to be seen as a luxury good – to the consternation of some autos industry analysts. So, as Gadfly’s luxury goods writer (who knows nothing about cars, I don’t even own one), I thought I’d take a look. In many ways, the analogy stacks up. Sorry, petrol-heads.
There are long waiting lists to get your hands on a Ferrari, and it can frustrate or satisfy demand as it sees fit. In other words, it’s a lot like an Hermes Birkin bag, lusted after by many, but deliberately kept in short supply.
Luxury goods stocks are back in favour. Chinese growth is returning, while any tax cuts for rich Americans would be happy news for the people who sell expensive stuff. On that logic, Ferrari should benefit. It operates in a buoyant part of the market. Car sales outpaced all other categories of luxury spending in 2016, rising 8 per cent, according to Bain & Company and Altagamma. Personal luxury goods fell 1 per cent.
Still, even in the rarefied world of top-end goods, Ferrari stock isn’t cheap. The shares will cost you 27 times its expected earnings, much higher than the 19.5 times average for Bloomberg Intelligence’s index of luxury companies.
Some premium may be justified. Cars are hot right now among the high-net worth crowd, while that “prancing horse” badge of exclusivity has value. Look at Hermes, whose forward price to earnings ratio is a mightily opulent 37 times.
Still, we mustn’t get carried away. However hard Ferrari tries, it’s still a carmaker. The shares of BMW AG and Daimler AG trade on about 8 times future earnings. I agree that Ferrari shouldn’t be lumped in with the high-volume luxury carmakers, but there’s something troubling about giddy talk from analysts about the shares hitting US$100.
