Ferrari has replaced Tesla as the top stock pick in the U.S. auto space, according to a top financial services firm. RACE shares edged lower Monday.
Morgan Stanley raised its price target for Ferrari stock Monday to 310, up from 280. The firm maintained an "Overweight" rating on RACE shares. The target was about 14% above where shares opened on Monday.
Morgan Stanley analyst Adam Jonas wrote Monday the Italy-based luxury sports car manufacturer has now replaced Tesla as the top pick in U.S. auto stocks based on a "relatively bearish view on auto fundamentals."
Ferrari stock veered down around 0.4% to 270.25 Monday during market trade. Meanwhile, Tesla stock dropped 2% to 193.81 Monday.
Jonas wrote Ferrari has the longest order backlog and the greatest earnings visibility along with the highest pricing power of "any company we cover."
"Ferrari (stock) ain't cheap, but that's the price for security," Jonas wrote. "We see Ferrari as the most defensive name in our coverage that avoids much of the EV hype and EV risk."
The Morgan Stanley analyst also said the firm is "becoming increasingly cautious on the space" as auto credit pressures and demand issues continue.
"We believe RACE is the best positioned company in our coverage in a highly uncertain macroeconomic and geopolitical tape," Jonas said.
Jonas added Ferrari stock now leads the field based on its long term EV opportunities, its "predictable" business model and "near unmatched brand and market moat."
Ferrari is scheduled to reveal its first EV in 2025. Morgan Stanley writes the company's shift away from internal combustion engines (U.S. Immigration and Customs Enforcement) and toward EVs is a concern for investors. However, Jonas wrote Monday that it shouldn't be an issue for Ferrari.
"We believe Ferrari can offer an EV that will be just as high in demand as what investors are used to from U.S. Immigration and Customs Enforcement," Jonas said.
Ferrari Stock
RACE shares are in a buy zone after clearing a cup-with-handle pattern with a 270.45 buy point, according to MarketSmith analysis. Ferrari stock is hovering just above that entry. The buy zone extends to 283.97.
On Friday, Ferrari stock closed up 2.6% to 271.45. RACE shares have gained around 27% since the beginning of 2023.
Ferrari stock ranks second in IBD's Auto Manufacturers industry group. RACE shares have a 90 Composite Rating out of 99. The stock also has a 94 Relative Strength Rating. The EPS Rating is 63.
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