Since the stock reached an all-time high last July, Ferrari (RACE 0.71%) investors have bid the shares down 33% (as of June 5). During a capital markets presentation in October, the business forecasted slower-than-expected growth through 2030. Furthermore, investors don’t seem upbeat about Ferrari’s recent introduction, its first fully electric vehicle called the Luce.
Here’s why the market is wrong about this supercar manufacturer.
Image source: The Motley Fool.
The market is being short-sighted here. This is an outstanding company, whose revenue and diluted earnings per share have risen 83% and 110%, respectively, between the first quarter of 2021 and Q1 2026. While the pace of growth might slow, this overarching trend should continue over the long term.
The growth isn’t eye-popping. But it’s the consistency and predictability that are notable.
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Plus, the Ferrari brand, the single-most important asset that supports the company’s wide economic moat, is still robust. The business possesses incredible pricing power, driven by low-volume runs driving strong demand, leading to a trailing-five-year average quarterly operating margin of 27.2%.
The luxury automotive stock trades at a price-to-earnings ratio of 33.4. This valuation is at an 18% discount to the stock’s historical average. And the multiple has contracted 34% in the past 12 months.
For investors who have been waiting patiently on the sidelines, it’s time to get in the driver’s seat. Ferrari is a smart buy.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ferrari. The Motley Fool has a disclosure policy.
