Ferrari shares in focus

Home > Industry Analysis > Content

【Summary】Ferrari shares have been performing well and are up over 43% in 2023. The company's fundamentals are strong, with solid revenue, earnings per share, and profit margins. However, the stock is currently overvalued compared to other car manufacturers. Despite this, there is potential for more growth due to the exclusivity and desirability of the brand, as well as expansion into new markets and the development of electric vehicles.

FutureCar Staff Aug 31, 2023 7:33 AM PT

Ferrari shares have experienced significant growth since their entry into the market in 2015. However, investors are now wondering if there is still room for further expansion. Let's take a closer look.

Ferrari N.V. is a luxury automotive manufacturer based in Maranello, Italy. The company is renowned for its high-performance sports cars. While Ferrari shares have been on an upward trend in recent years, there was a slight setback in 2022 due to soaring interest rates. Nevertheless, in 2023 alone, shares have seen an impressive increase of over 43%.

It's important to understand that Ferrari is a premium company, known for its exclusivity. With an expected sales volume of only 15,000 cars in 2023, the company's limited availability is a core aspect of its business. Despite its high valuation, investors are still eager to own a stake in the company.

Examining the fundamentals of Ferrari, the company generated €5.5 billion in revenue in 2022, with an earnings per share (EPS) of €5.93. With a solid profit margin of 19.5% and manageable debts, Ferrari is in a strong financial position. Net income has also experienced an impressive 33% growth in the past year, largely due to increased sponsorships.

When considering the fair value of Ferrari shares, a discounted cash flow analysis puts the stock at $40.49, significantly lower than its current price of $307.53. In comparison to other vehicle manufacturers like General Motors or Ford, which have price-to-earnings (P/E) ratios of 4.4 times and 11.4 times, respectively, Ferrari's P/E ratio of 44.7 is quite high.

Looking ahead, the potential for further growth in Ferrari is difficult to quantify due to the exclusivity and desirability of the luxury market. However, the brand's association with success and the ongoing demand for owning a Ferrari suggest that the company's prospects remain promising. Ferrari's global prestige is expanding as it enters new markets, such as China and the US. Additionally, the company is developing new products, including its first electric Ferrari, expected to launch in 2025.

There are certain risks that Ferrari must navigate to maintain its desirability and premium brand status. While every Ferrari that goes on sale continues to sell out, any decline in demand could be detrimental to the company's position. With such a high valuation, Ferrari cannot afford to be perceived as "just another car company." The brand's performance in Formula One competition in recent years has raised concerns about a potential decline in brand quality.

Although Ferrari primarily caters to consumers with expensive tastes, it is not entirely immune to economic downturns. A recession could lead to a decline in demand for luxury supercars. Additionally, increasing competition and the shift towards electric vehicles may hinder growth, especially if the internal combustion engine becomes less relevant.

Despite these risks, Ferrari remains a special company with the ability to set prices confidently, knowing that its products will be quickly snapped up. With a strong order book for the coming years and the introduction of an electric car, the future looks promising. Despite its high valuation, the brand's prestige sets it apart. If the company can continue to execute well and maintain its desirability, there is reason to believe that it will continue to grow. Therefore, I am personally considering buying Ferrari shares at the next opportunity.