What is the expected funding source for the €2 billion buyback program and how might it influence Ferrari’s leverage and credit metrics?

Funding source

Ferrari’s €2 billion buy‑back is being financed mainly out of the group’s robust cash‑generating capacity and existing liquidity. The company repeatedly emphasised that the €360 million eighth tranche – and the remainder of the programme up to the €2 bn target by 2026 – will be executed “in line with the disclosure made during the 2022 Capital Markets Day”. In that disclosure Ferrari’s management said the programme would be “back‑filled by internal cash flows and, where required, the Company’s existing revolving credit facilities”. In other words, the bulk of the repurchases will come from retained earnings and cash on hand; a limited amount of short‑term debt may be tapped if the timing of share‑repurchases outpaces free cash generation.

Impact on leverage and credit metrics

Because the buy‑back is largely cash‑driven, the immediate effect on Ferrari’s leverage is modest. Using internal cash reduces the equity base only marginally while the assets (cash) used are already part of the balance sheet, so net‑debt‑to‑EBITDA and debt‑to‑EBIT ratios are likely to remain stable or even improve. Should the revolving facility be used, the incremental net‑debt will be small relative to the company’s €3–4 billion cash‑equivalent position and the €1.5 billion‑plus of EBITDA reported in the last twelve months, leaving the credit rating untouched. In short, the programme should not materially erode Ferrari’s credit profile; instead, the reduction in share count will lift EPS and return‑on‑equity, providing a bullish catalyst for the stock without compromising financial health.

Trading implications

• Short‑term: The confirmation that the program is cash‑funded should keep the market’s focus on the structural upside – a higher EPS and tighter supply of shares – rather than on balance‑sheet strain. Expect the share to trade at a premium to the current relative‑valuation level, especially if the price remains near the recent highs on the NYSE/Euronext.
• Medium‑term: As each tranche proceeds, the buy‑back will continue to compress the share‑float, support dividend coverage, and reinforce the “quality‑company” narrative. A sustained, cash‑backed repurchase schedule positions Ferrari as a safe‑haven pick in a risk‑off environment, while still offering upside if the broader market rallies.
  Consequently, a long‑position at current pull‑backs or via an opportunistic “buy‑the‑dip” while holding a modest stop‑loss (≈5 % below the entry) aligns with the fundamentals and the low‑risk funding profile of the programme.