Despite the gloomy economic outlook, no recession seems to exist for the
luxury automaker as its superior products are in high demand, as quarterly
car sales reached an all-time high of 3567.
Customers trying to get a new Ferrari must be patient as the waiting list
extends into 2025. The testament to the above statements is the newly
launched Daytona SP3 model, which is limited to 599 units. This constrained
supply, in combination with very high demand, enables Ferrari to charge a
whopping starting price of $2.3m for that particular model, which was sold
out even before its unveiling.
Unsurprisingly in Q1’2023, the company reported better-than-expected
Revenue of €1,429m (vs. consensus estimates for €1,375m) and EBIT of €385m
(26.9% margin) driven by its elite clientele and incredible brand loyalty.
For a growing crowd of investors, the luxury sector to the European stock
market is analogues to what Big Tech has been to the US: Dominant
businesses whose growth is unshakable even as the economy loses steam.
Ferrari is a testimony to the trend of a brand that has always been
synonymous with luxury.
As seen from the chart above, demand for high-end sports cars has held up
well among Ferrari’s wealthy customers even as it increased prices. This is
in stark contrast to some automakers, such as Tesla, who are losing pricing
power as the economy heads for a slowdown. As a result, Ferrari shares have
been outperforming Tesla recently by miles, up over 40%, while Tesla is
down a staggering 33%.
A testament to Ferrari’s incredible profitability is its gross profit
margins (GM) of close to 50%, head and shoulders ahead of the competition;
Tesla comes second with GM of 23%. However, the latter has been slashing
prices recently, negatively impacting its profitability.
Is the rally overextending?
The stock is up 37% year-to-date, trading at an all-time high of $300, and
despite its incredible momentum, the number one luxury automaker could face
some major corrections. The current share price already reflects a lot of
positive market news, such as the unprecedently high demand and improving
company fundamentals. However, the Italian luxury automaker is trading at
about seven times its forward sales (and 40 times forward earnings), by far
the most expensive car stock in Europe, in fact, more expensive than any
other auto manufacturer, except for Tesla.
High conviction investors might short the stock using our
-3x Ferrari
or long Ferrari using our
3x Ferrari.
