Ferrari’s latest electric vehicle, the Luce, has been met with mixed reactions from fans and investors alike. The polarizing design of the car has sparked criticism from some, who argue that it lacks the emotional core typically associated with Ferrari vehicles. Many believe that a Ferrari should have a sexy exterior and a scintillating soundtrack from a high-revving gas engine, which they feel the Luce is lacking.
Following the release of the Luce, investors punished Ferrari stock. However, Morgan Stanley believes that the market’s reaction was too severe. Analyst Edouard Aubin upgraded Ferrari to Overweight from Equal Weight and raised its price target, citing that the stock had fallen significantly without a corresponding decrease in earnings estimates.
Despite the backlash against the Luce, Ferrari continues to maintain strong profit margins, hovering around 40%, which is considered the industry gold standard. The company is still in the business of making money, with strong demand for new models like the special-edition 12Cilindri with a manual transmission.
Morgan Stanley acknowledges that there are concerns surrounding Ferrari, such as slowing volume growth, sliding resale values on hybrid sports car models like the SF90, and the polarizing launch of the Luce. However, the bank believes that the market has overreacted to these issues and that Ferrari’s brand remains strong, with dealer traffic still robust.
The bank sees Ferrari as a direct beneficiary of the so-called K-shaped economy, in which the wealthy continue to drive economic growth through their spending. With new models in the pipeline and strong demand for scarce and collectible Ferrari vehicles, Morgan Stanley believes that Ferrari’s future looks promising.
While there are risks associated with investing in Ferrari, Aubin and Morgan Stanley believe that the potential rewards outweigh these risks, especially considering that Ferrari’s current multiple trades below its 10-year average. Overall, the bank remains bullish on Ferrari’s prospects and sees potential for significant upside in the stock price moving forward.
