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Why Ferrari Plunged Last Week

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Updated

Ferrari’s stock fell

Ferrari stock (RACE) traded on a negative note last week (ended November 10) and settled at $109.56, with a weekly loss of 6.7%. This was the worst weekly loss for Ferrari stock in the past nine months.

Ferrari stock has lost ~0.8% on a quarter-to-date basis as of November 10.

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Key support and resistance levels

On November 10, Ferrari stock tested an immediate support level near $108.50 but couldn’t violate that level. This level of $108.50 should continue to act as an immediate support this week, and a violation of this support could attract renewed selling pressure.

As with Fiat Chrysler Automobiles (FCAU) stock, Ferrari’s RSI (relative strength index) indicators have diverged from the stock’s price.

On the upside, an immediate resistance level lies near $113.70, followed by key resistance at an all-time high of $117.50.

Strong fundamentals

On November 2, Ferrari released its 3Q17 results, reporting earnings of 0.74 euros, or $0.86, per share in 3Q17. This reflected ~25.4% YoY (year-over-year) gains. Its 3Q17 revenues rose 6.7% YoY, while its shipments to North America also rose.

Higher global volume and product mix helped Ferrari grow its profit margins in 3Q17. Ferrari’s profit margins are far better than mainstream automakers (XLY) Fiat Chrysler (FCAU), Ford Motor (F), and General Motors (GM).

During its 3Q17 earnings event, Ferrari also revised its 2017 adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) guidance upward to 1 billion euros. The company had previously guided its adjusted EBITDA to be ~950 million euros.

In the next and final part, we’ll discuss Harley-Davidson’s stock performance last week.

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