Ferrari (RACE) has had a good run on its exceptional pricing power, but Hermès (FR:RMS) has even more to offer, say analysts at Stifel.
Both Birkin bag maker Hermès and Maranello-based Ferrari trade on multiples some way above their peers, and both stand out in terms of pricing power, profitability, and transparency on earnings. But in a note published today comparing the Italian and French marques, Stifel says it prefers Hermès due even higher margins and broader geographic reach, as well as potentially lower residual values for Ferrari.
Hermès should continue to outgrow the sector this year thanks to “untapped pricing power, high visibility for leather goods and a loyal, wealthy clientele,” the analysts say, adding that the French luxury goods firm’s long-term story remains “intact.”
It has a “proven track record of outperformance” for offering a relatively less cyclical low-teen sales growth profile and the highest margin among the luxury stocks covered by the analysts. Hermès, they continue, has “room for further gradual expansion” thanks to its “unmatched uber-luxury brand image and a compelling retail productivity story” which underpin its premium valuation during periods of uncertainty.
Ferrari, meanwhile, has a high multiple that is “justified by future earnings transparency, thanks to a resilient order book,” which is due to high residual values since “nobody would cancel a Ferrari order.”
However, Stifel now says residual values are starting to weaken, due to new propulsion systems and high list prices. As such it has a Hold rating on Ferrari stock and a Buy rating on Hermès.
investors looking to compare RACE vs RMS can use the TipRanks Stocks Comparison Tool to weigh up the various data and indicators. Hermès is traded in the U.S. under the tickers (HESAF) and (HESAY).
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