Is Ferrari N.V. (RACE) A Good Car Stock To Invest In Now?

Ferrari N.V. (NYSE:RACE) is a leading luxury sports car manufacturer, renowned for its high-performance vehicles and rich racing heritage. The company's strong brand and pricing power have contributed to its ability to maintain high profit margins, even during economic downturns and market fluctuations. In this article, we will discuss why Ferrari N.V. (RACE) is a good car stock to invest in now.



Ferrari stock has a strong, unmistakable long-term uptrend over time. The company's focus on luxury and exclusivity has significantly contributed to its stock performance. The company's revenue growth over the past five years has been impressive, with a compound annual growth rate (CAGR) of 11.18%. This growth can be attributed to Ferrari's ability to maintain its luxury image and cater to the high-end market segment. Additionally, Ferrari's profit margins have remained consistently high, with an operating margin of 27.61% and a net profit margin of 22.14% in the last 12 months.



Ferrari's focus on internal combustion engine (ICE) supercars has been a significant part of its brand identity and success. However, the global transition to electric vehicles (EVs) poses a challenge to the company's competitiveness in the long run. To address this issue, Ferrari is implementing several strategies to adapt to the growing demand for sustainable and eco-friendly vehicles. These strategies include:

1. Hybrid and Electric Vehicles (EVs): Ferrari is investing in the development of hybrid and electric powertrains. In the third quarter of 2024, 55% of Ferrari's shipments were hybrid vehicles, indicating a significant shift towards more sustainable powertrains. Additionally, Ferrari plans to launch its first full EV in late 2025, with a price tag of at least $535,000 (Reuters).
2. Racing and Technology Transfer: Ferrari's involvement in Formula One racing provides a platform for developing and testing new technologies, which can then be transferred to its road cars. This helps Ferrari stay at the forefront of innovation and sustainability.
3. Exclusivity and Branding: Ferrari maintains its exclusivity and branding by limiting the production and sales of its vehicles. This strategy helps Ferrari maintain high margins and pricing power, even as it transitions towards more sustainable powertrains.

These strategies are expected to have a positive impact on Ferrari's long-term profitability:

1. Diversified Product Portfolio: By offering a mix of internal combustion engine (ICE), hybrid, and electric vehicles, Ferrari caters to a broader range of customers, increasing its market reach and potential sales.
2. Innovation and Technology Leadership: Ferrari's investment in research and development, particularly in hybrid and electric powertrains, positions the company as a leader in sustainable luxury vehicles. This can lead to increased customer loyalty and brand value.
3. Maintaining Exclusivity and Pricing Power: Ferrari's strategy of limiting production and sales helps maintain its brand exclusivity and pricing power. This ensures that Ferrari can continue to command high margins, even as it adapts to the growing demand for sustainable vehicles.



We believe that long-term investors should consider the opportunity to add RACE stock after its recent correction. The stock is so strong and well supported that it didn't enter a bear market, even though the Invesco QQQ ETF (QQQ) briefly entered one. Furthermore, we are confident that Ferrari continues to look very well-positioned moving forward. It has many secular drivers undergirding its opportunities as well. Moreover, its robust profitability and free cash flows will continue to offer investors a defensive posture in the face of higher inflation and interest rates. Consequently, we reiterate our Buy rating on RACE stock.

In conclusion, Ferrari N.V. (RACE) is a good car stock to invest in now. The company's strong brand, pricing power, and commitment to sustainability make it an attractive option for long-term investors. Its well-diversified luxury sports car business model, robust profitability, and free cash flows position it well to weather economic downturns and market fluctuations. We recommend adding RACE stock to your portfolio and reiterate our Buy rating on the stock.