Should You Buy Ferrari Stock

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Should You Buy Ferrari Stock

Should You Buy Ferrari Stock?

The stock price of Ferrari declined by almost 29% in the last 6 months. So, it is safe to say that Ferrari (RACE) stock is going through a rough patch.

A quick look at the history of Ferrari stock shows that such a big drop is unusual. After all, the Italian luxury automaker is known for being a highly stable stock.

Ferrari's New Supercar F80 Is A Hybrid

Also, the Ferrari cars are regarded more as collectibles, which makes the company very different from other cyclical car companies.

So, why has the Ferrari stock price declined in the last few months? A key reason was the 5 year financial targets set by the Ferrari management. The targets mean the company is now expecting a slower growth rate in the next 5 years.

But if we keep the 5-year targets aside, it is clear that the underlying business of Ferrari is doing great. In fact, the company is also very close to rolling out its major new supercar.

In the next 5 years, the company is expecting only 5% compound growth rate on a yearly basis. This can look uninspiring to many, but we must also look at Ferrari's newest supercar.

The F80 supercar is a hybrid, and its deliveries are expected to increase in 2026. According to analysts, the sales of this supercar will provide a boost to the earnings and revenue.

Also, the P/E ratio of Ferrari stock shows it is still a little expensive when we look at other stocks. When we combine with just a modest growth rate, it becomes clear that one can't expect any major upside in Ferrari stock.

The bottom line is that Ferrari stock will not provide any major returns in the short-term. But, it is still a worthy stock for the long term, given the strong brand loyalty and strong order book of Ferrari.

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