Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

What Does Ferrari’s IPO Mean For Tesla and Apple?

Page 1 of 2

Day one of Ferrari NV (NYSE:RACE)‘s life as a public company certainly went well. Shares of the ultra-premium auto manufacturer rallied 5.77% to close at $55 a share, giving the company a market capitalization of $10.39 billion. Given that everything is connected, what does Ferrari’s successful IPO mean for Tesla Motors Inc (NASDAQ:TSLA) and aspiring car company Apple Inc. (NASDAQ:AAPL)?


First a little about ourselves. We at Insider Monkey track hedge fund activity. Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 52 percentage points during the three years since the end of August 2012. These stocks returned a cumulative of 102% vs. 49% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).

Given Tesla Motors Inc (NASDAQ:TSLA) sells vehicles to the same jet set as Ferrari does, Tesla Motors Inc (NASDAQ:TSLA) and Ferrari are similar in several key points. Both companies’ vehicles command premium prices. Both companies are demand-limited, with Ferrari limiting its annual sales to 7,000-7,255 to preserve exclusivity and Tesla Motors manufacturing 50,000-55,000 vehicles this year because it’s a relatively new company. Both companies were also founded by visionaries.

There are also some differences. Ferrari’s brand recognition and image is much higher than Tesla’s. Ferrari is profitable, while Tesla isn’t yet. According to SEC filings, Ferrari made 265 million euros in 2014, or about $300 million, while Tesla Motors doesn’t expect to be GAAP profitable until 2020. Because Tesla isn’t profitable and Ferrari is, Tesla’s car business isn’t worth as much as Ferrari’s based on traditional valuation metrics at the current time, although Tesla’s car business could certainly be worth much more if Elon Musk & Company execute in the future. Good execution isn’t guaranteed, however, and the smart money is sharply divided on whether Tesla can ultimately execute (Tesla is one of the most popular stocks that hedge funds have bought ‘Put’ protection against).

For the sake of comparison, given Tesla’s current $27.65 billion valuation, assuming Musk and Company executes well, but not lights-out-well, and Tesla’s car business is as valuable as Ferrari’s, the market is assigning a $17 billion valuation to Tesla’s battery storage and other businesses. This means Tesla’s stock isn’t really an automotive stock, it is an alternative energy or an energy storage company, which is what bond guru Jeff Gundlach has been saying all along. So for investors who are considering buying Tesla shares, the real question they should be asking is, “Is Tesla’s battery/energy storage business’ optionality worth $17 billion or more?”. Famed short-seller Jim Chanos, who is bearish on Tesla, agrees with Gundlach in a way. Chanos thinks Tesla is a good tech company, but not a good automotive company.

On the next page, we examine what Ferrari’s IPO means for Apple.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!