Ferrari Down On New of New Fuel Tax
Shares in Italian automaker Ferrari are trading a little over 1% lower pre-market on Friday. The company has been hit by news of a proposed new tax fuel in France.
A Bloomberg report this week is citing new draft legislation moving through the legal channels in France which would increase the penalty on Ferrari and Porsche carbon dioxide emission to 50,000 EUR. This would mark a steep increase on the two brands. Both already incur the highest taxes on the continent.
The new fine amount would double the current levy on Ferrari vehicles, due to take effect from 2022. Such an increase could dramatically impact demand for Ferrari in France which is one of the five main European markets for Ferrari. Along with the UK, Italy, Germany, and Switzerland, France accounts for around 30% of all Ferrari sales globally.
Ferrari Shares Reverse Earlier Gains
Following a solid Q2 earnings release, Ferrari saw its stock price rallying by around 10 EUR. The Italian carmaker posted earnings per share of 0.89 over the quarter. This beat estimates of a 0.83 reading.
However, Ferrari shares have been in a steady decline across recent months, peeling back from August highs around the 168 mark to trade currently around the 152 level. The give-back has come amidst rising fears over the impact of a second wave of COVID-19. The company would see its production and distribution impacted heavily should lockdowns be reintroduced.
Weak Q3 Earnings Following Strong Q2
The sell-off was exacerbated by a set of weaker than expected earnings for Q3.
Ferrari reported Q3 earnings per share of 0.05, below the 0.06 forecast. It marks a heavy contraction from the prior quarter’s results. Net revenues fell by 42% on the same quarter a year earlier, reflecting the dramatic loss in sales. With Formula 1 having canceled over 10 races in this year’s season, Ferrari also noted a significant loss of revenues from F1. The races have traditionally been a strong earner for the company.
Ferrari Testing Key Support
Following the breakdown below the rising trend line from 2020 lows, Ferrari shares have been trading lower within a tight bearish channel which has developed over the correction from 168.
For now, price is still sitting above the key support level of 151.10. While above here, the current move is still seen as corrective and longer-term players will look for price to rotate higher again with an eventual break of the 167.05 level the key objective.
However, a break below 151.10 would then turn focus onto the 143.35 level support and the potential for a deeper correction lower.