With its legendary F1 team and top-notch sports cars, many investors dream of owning shares of Ferrari. But is Ferrari stock a buy amid the latest Formula One season and as it leads Tesla in a key category? Read on to find out.
Many investors want to own stocks with a little bit of cachet — and few names are more associated with luxury than automobile maker Ferrari.
One thing is certain: With a new Ferrari SF90 Stradale costing upward of $500,000 and a 2023 Ferrari 812 GTS costing more than $400,000, RACE stock is far more affordable for the average American looking to boast of Ferrari ownership.
Charles Leclerc Falls Behind In F1 Race
Fiat Chrysler, now part of Stellantis, spun off Ferrari in 2016. While it is known for its sports cars, it is also the oldest and most successful team in Formula One racing.
Ferrari's standing as arguably the greatest company in motor sport gives it a unique cachet, especially among high rollers.
Its Scuderia Ferrari team has won 16 F1 constructors titles and 15 drivers titles, winning even more fans in the process. Legendary drivers for the team include all-time greats Michael Schumacher, Sebastian Vettel, Alberto Ascari and Juan Manuel Fangio.
The firm has been in a prolonged dry spell, partly due to the recent domination of fellow automotive giant Mercedes. However, Red Bull Racing — long a plaything for the fizzy drink giant's founder Dietrich Mateschitz — has been the team to beat for the last couple of seasons.
This is partly due to their exceptional lead driver, Max Verstappen, and perhaps even more down to Chief Technical Officer Adrian Newey.
Scuderia Ferrari have responded, axing Team Principal Mattia Binotto and replacing him with Frenchman Frédéric Vasseur.
The team has a highly rated lead driver of its own in Charles Leclerc. He promised to end Ferrari's 16-year world championship drought at the team's car launch event in February.
"The goal is to win. I am really looking forward to getting back in the car and trying to win that championship. Last year was a good step forward," Leclerc said. "We need to do just the same this year and hopefully get that championship. That is the target for the team and for me too, get more wins, be more consistent from the first race to the last race."
So far though Leclerc's F1 title challenge has not gone according to plan. He is now badly lagging Verstappen after a string of lackluster results and now . Not only is he well behind championship leader Verstappen, he is also behind Mercedes driver Lewis Hamilton and Aston Martin veteran Fernando Alonso. He has finally managed to leapfrog Spanish teammate Carlos Sainz in the standings however.
Ferrari Stock Analysis: RACE Leads Tesla Stock
Ferrari stock has formed a new flat base. The ideal entry point here is 329.88. Its relative strength line remains near highs.
While the stock has been fighting back in recent sessions, RACE stock currently sits just below the key 50-day moving average. Retaking this level would be a positive.
All-around performance is strong, with its IBD Composite Rating coming in at a perfect 99. The stock has been on a tremendous run, rising more than 45% so far in 2023.
Earnings have been improving in 2023, which is reflected in its EPS Rating coming in at a strong 93 out of 99.
Sales grew by 19% in the most recent quarter and Ferrari boasts a 3-year sales growth rate of 16%, IBD data shows.
Analysts see strong earnings growth ahead. Full-year EPS is expected to pop 31% in 2023 and 15% in 2024.
Institutional sentiment slightly negative though, with its Accumulation/Distribution Rating of D+ representing slightly more selling than buying among funds of late.
RACE currently holds the lead over Tesla stock in the IBD Auto Manufacturers Group. Ferrari now leads the group along with Li Auto.
RACE Stock Has Wide Moat
Due to its unique brand and high-end offerings, analysts believe the car firm has a wide moat.
Stable long-term revenue, addressable market growth, profit margin expansion and robust returns on invested capital are among reasons it is seen as a solid potential investment.
The firm is also expected to show resiliency during periods of economic uncertainty due to its clientele of high-net-worth individuals.
There are obvious signs of robust demand for its products. The firm halted orders for its new Purosangue SUV in November because the wait time had reached at least two years. Existing clients are getting priority on its first production run.
Analyst Backs Ferrari Stock
CFRA analyst Garrett Nelson is rating Ferrari stock as a strong buy with a 350 price target. He believes the brand is going "from strength to strength."
"Ferrari remains in a virtuous cycle of strong sales growth, robust R&D investment (around 20% of annual sales), and continued Formula One success-led pricing power," he said in an Aug. 5 research note. "Ferrari's decision several years ago to not cap its annual vehicle production around the 7K-8K unit level continues to pay off in the form of top-line growth, which has largely flowed through to the bottom line and allowed Ferrari to more easily absorb inflationary pressures."
Earlier this year, Ferrari was named the top stock pick in the U.S. auto space, according to Morgan Stanley.
Is Ferrari Stock A Buy Now?
With a strong brand, strong earnings projections and bullish action in 2023, Ferrari is a stock that is worthy of consideration by investors keen on the stock.
The stock has formed a new base, and a strong run could see it offer a new buy point. Investors should consider adding it to their watchlist so they can buy when the opportunity to buy presents itself.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
