Its excellent stock ticker symbol no longer represents the big picture, and that's a good thing.
There's a lot of talk about the automotive sector and how we're experiencing a revolutionary time of electrification in that industry -- one that could create millionaires out of early investors. Tesla and its unique leader Elon Musk have become names synonymous with electric vehicles. And over the past year, Fordhas been making its mark under new CEO Jim Farley as the revamped Mustang and F-150 truck transition to electric batteries to support their raw power.
Ferrari (RACE -1.45%) is one company that not only carries perhaps the best stock ticker symbol of them all, but is also gaining more traction in popularity and is becoming a brighter blip on the radar of investors.Let's look at what the company has going for it.
Image source: Ferrari.
2021 saw its largest number of vehicles sold in a single year
Looking at Ferrari's stock price change since November might lead investors to think Ferrari is not doing so well, declining by 20% from a high of $278 down to $224. But one listen to its recent earnings call tells a different story. While Tesla and Ford have seen their share of limelight related to electric vehicles, Ferrari has quietly been doing what it does best: selling high-quality supercars.
So if you're looking to compare Ferrari to Ford, don't bother. Yes, they're both automakers, but Ferrari is more focused on quality rather than quantity -- that's no dig on Ford. Ferrari operates in a completely different market segment. Its least expensive vehicle goes for around $226,000. And it doesn't take many of them to generate revenue of over $2 billion. In fact, Ferrari's 2021 full-year revenue totaled $4.8 billion, a 23% increase over 2020, supported by a company record number of vehicles sold -- 11,155 total for the year -- up 22% over the previous year. By comparison, Ford sold 1.9 billion cars in 2021.
That sales jump helped the company generate earnings that beat Wall Street's estimates by 12% for the second consecutive quarter, and the number of vehicles shipped has now grown in six consecutive years, along with an order book stretching into 2023 that CEO Benedetto Vigna describes as its strongest ever.
Entering the SUV market to extend growth
As Ferrari looks toward filling those orders into 2023, it also wants to extend its growth into new markets such as SUVs and electric vehicles. The company has stated that it wants to be carbon neutral by 2030, something similar we've heard from Ford and other U.S.-based automakers. In order to do that, it plans to have fully electric vehicles by 2025 to go along with its hybrid model released in 2019, which sells for a cool half a million dollars.
Manufacturing electric vehicles could be more acceptable to customers of Ferrari than offering SUVs. First off, Ferrari is not a name you might think of as synonymous with SUVs -- but believe it or not, in the SUV market for supercar automakers, Ferrari is playing a bit from behind and will face competition from Porsche, which released its first SUV in 2002, and from Lamborghini, which entered the market in 2017, along with Aston Martin in 2020.
Ferrari's entry vehicle into the SUV market is called the Purosangue. Though mum is the word related to its sales price and availability date, Vigna claims that the ride of the vehicle is astonishing and will exceed customers' expectations when it becomes available for purchase in 2023 (production will start this year). If Ferrari keeps in line with its historical inventory limitations, the supply will be tight, and if demand is strong, it will work in the company's favor for pricing.
A stronger model mix sets the tone for 2022
Building off of double-digit growth across all global regions, Ferrari heads into 2022 with a stronger model mix, including the Dayton SP3 and the SUV Purosangue. This should allow the company to meet the needs of customers looking for something more out of their Ferrari, as well as broaden its exposure to new Ferrari customers.
Analysts seem to be on board with the company's plans. Morgan Stanley has Ferrari listed as its top among electric vehicle stocks for 2022, and the average 12-month price target for all analysts covering the company is $294. That target price reflects a 31% upside from the current price of $224 -- just one of many reasons Ferrari is a buy.
Jeff Little owns Ford. The Motley Fool owns and recommends Tesla. The Motley Fool has a disclosure policy.
FAQs
The stock trades at a price-to-earnings (P/E) ratio of 52. That's more than double the multiple that the S&P 500 currently carries. On the one hand, investors can make the easy argument that this valuation is justified. Ferrari is a special business with a powerful brand, impressive financials, and growth potential.
Why should you buy a Ferrari? ›
Ferrari vehicles tend to hold their value over time, and often even appreciate in value. Not only is the purchase or lease of a Prancing Horse an investment in pure driving pleasure, but it can also be a sound financial investment!
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What are the positives of Ferrari? ›
Ferrari's key strengths lie in its dominant position in the luxury car market, high-performance tradition, and brand recognition 2.
Why is Ferrari so special? ›
The Foundation of the Ferrari Brand
The Prancing Horse symbolises exclusivity, performance and quality all over the world. Our prestige is built upon decades of sporting success and the inimitable style of our cars, which are unique in their innovation, technology and driving pleasure.
What is cool about Ferrari? ›
To date, among the many popular Ferrari car facts is that this automobile brand holds more than 5,000 trophies, 14 Sports Car Manufacturer's World titles, 15 F1 Drivers' World titles, 8 Mile Miglia titles, 9 Le Mans 24 Hours victories, 7 wins at Targa Florio, and 216 F1 Grand Prix victories.
Is Ferrari good for daily use? ›
You can daily drive a Ferrari, but be prepared for questions, challenges, and appearances on other people's social media.
Is Ferrari a good car to own? ›
It is known for its relatively reliable engine and drivetrain. However, potential owners should be mindful of the high maintenance costs. Regular services, which are crucial to maintain the car's performance and reliability, can be expensive.
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Let's say that you start with the time frame in mind, hoping an investment will double in value over the next 10 years. Applying the Rule of 72, you simply divide 72 by 10. This says the investment will need to go up 7.2% annually to double in 10 years. You could also start with your expected rate of return in mind.
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Since 1993, The Motley Fool has been a trusted source of investment and financial advice to millions of members. Read their reviews showcasing our commitment to making the world smarter, happier, and richer. We are dedicated to customer feedback in order to provide the best services possible.
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"Double down buy alerts" from The Motley Fool signal strong confidence in a stock, urging investors to increase their holdings.
Is a Ferrari car a good investment? ›
Keeping your Ferrari in top shape is important if you want it to keep or increase its value. Think Long-Term: Investing in a Ferrari isn't a quick way to make money. It's more about playing the long game. While their prices can go up and down in the short term, Ferraris tend to become more valuable over time.
Why is Ferrari so valuable? ›
Ferrari's allure was built on scarcity and exclusivity. Even if you can afford a Ferrari, with an average price of $380,000, securing an order is nearly impossible.
Is Ferrari a growth stock? ›
Ferrari's Earnings Growth And 40% ROE
Second, a comparison with the average ROE reported by the industry of 19% also doesn't go unnoticed by us. This probably laid the groundwork for Ferrari's moderate 13% net income growth seen over the past five years.
What makes Ferrari so successful? ›
Not only do consistent race wins satisfy consumers that Ferraris are mechanically sound and reliable investments, but the association with racers from Niki Lauda to Michael Schumacher help to elevate the Prancing Horse to a whole new level of both cool and competence.
