The Ferrari brand is among the most exclusive and revered in the world, but how much is it worth? Bloomberg reports that Fiat CEO Sergio Marchionne feels the Prancing Horse is worth more than 5 billion euros, or $7.3 billion in U.S. dollars. That's a big chunk of change for an automaker that cleared only $430 million in 2010 on sales of $2.73 billion, and the total represents 63 percent of the entire Fiat group's estimated worth of $11.4 billion.
The reason for Marchionne's high valuation of the Italian exotic car maker is its "sacred brand" status. Like an NFL team that sells for $1 billion only to average $20 million in profits per year, Ferrari is so highly regarded that it could sell for well beyond its cash-generation capabilities would indicate. If Ferrari were valued at $7.3 billion, that would be 17 times its annual earnings. Luxury brands average about 12.7 times annual earnings.
Marchionne has every reason to value his prized property as high as possible, but analysts and banks don't seem to agree with the CEO's assessment. Estimates are that Ferrari is worth about $4.3 billion. But at the same time, banks appear very eager for Fiat to issue an IPO for Ferrari, which could be an indication that there is serious money to be made.
Fiat has mentioned the possibility of offering an IPO for Ferrari as a way to generate cash and eliminate debt, though the automaker claims no decision has been made to put up the brand for public sale.
In other news, Marchionne told Bloomberg that he has put in an order for a white Ferrari FF. Yeah, we can see why Marchionne places a high value on the Ferrari brand. It's good to be the CEO.
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