Key Points
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Ferrari’s first electric vehicle, the Luce, sparked online criticism because of its distinctive design.
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The company’s strategic pillars, which rest on low volumes and high prices, remain firmly intact and support the brand.
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At the current price-to-earnings ratio of 33.1, near a five-year low, investors should be wondering why they don’t own this auto stock.
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In October last year, Ferrari (NYSE: RACE) announced its financial outlook for the rest of the decade. The forecast implied 5% annualized revenue growth between 2025 and 2030. Investors weren’t pleased, overreacting and immediately sending the stock down 21% in a matter of days.
This kind of price action is surprising to see from such a successful business. Shares saw choppy trading over the next several months.
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And then the market once again showed its displeasure when Ferrari revealed the Luce, its first fully electric vehicle (EV), on May 25. There was no shortage of criticism on the internet, with the unique design getting all the attention.
Ferrari shares have now been trading under $400 since November. Here’s whether long-term investors should pounce at the opportunity to own the Italian luxury brand.
Image source: The Motley Fool.
Let’s hear it for the Luce
The Luce was designed by outside consultancy LoveFrom, co-founded by former Apple chief design officer Jony Ive, so it makes sense that the look is completely unfamiliar to Ferrari fans. The performance, at 1,035 horsepower and a 0-to-62 mph time of 2.5 seconds, should quiet the naysayers. Also, at a starting price tag of about $640,000, it doesn’t deviate from the company’s strategy of producing a low volume of expensive cars.
At the end of the day, this is uncharted territory for Ferrari, as it’s new to the EV arena. But the Luce can expand the company’s addressable market, as it has four doors, five seats, and a sizable trunk that might cater to a larger demographic than typical racing enthusiasts. Even if this car is a total flop, which I don’t expect, it probably won’t make a big dent in Ferrari’s fundamentals.
Ferrari’s brand still stands for exclusivity, luxury, and incredible performance. These key tenets haven’t changed. Historically, they supported strong pricing power. There’s no reason to believe this won’t be the case in the years ahead.
The valuation has gotten attractive
This automotive stock, which is still up 691% in the past decade (as of June 3), currently trades 33% below its record from July last year. Market sentiment has shifted gears, with Ferrari shares driving in reverse.
This dip doesn’t reflect the company’s robust profitability. Ferrari reported an operating margin of 29.7% in the first quarter of 2026, a top-tier figure that is unheard of in the industry.
Unlike the vast majority of businesses, it can deliberately control supply so that customer demand is always insatiable, making its operations stable. Ferrari also serves the wealthiest clientele on the planet, supporting its resilience during recessions.
The current price-to-earnings ratio of 33.1 is close to a five-year low. It’s time for long-term investors to pounce on the opportunity to buy Ferrari.
Should you buy stock in Ferrari right now?
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Ferrari. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
