Is Ferrari the Next Tesla?

  • Ferrari could evolve into a Tesla-killer stock with a long-term pivot to electric vehicles and SUVs.
  • Morgan Stanley’s Adam Jonas gives the stock a price target of $265, which represents 37% growth from current values.
  • Investors should look forward to the release of the Ferrari Purosangue, an SUV expected to hit the market in 2022.

Tesla (NASDAQ:TSLA) is an automotive investor’s dream. Its share price has soared almost 290% year-to-date, while the S&P 500 has only returned a measly 5% over the same period.

With Tesla’s stock already so expensive, investors should start looking on to the next best thing in the industry–and that might be Ferarri. (RACE)

Traditionally known for its rapidly depreciating luxury supercars, Ferrari is evolving into a potential contender in the competitive SUV and EV markets. This move could drive massive gains in the company’s stock price over the long term.

Ferrari Is Doing Better Than Ever

Ferrari stock has performed well since it first started trading in 2015. | Source: YCharts

Since its 2015 listing on the NYSE, Ferrari’s share price has soared from $52 to $194.

While Ferrari’s second-quarter earnings have taken a hit from the coronavirus pandemic, the company reported record sales in 2019 and still expects to generate over $1 billion in core profit this year.

Ferrari is a popular investment because of its world-class brand and the pricing power it enjoys with customers. The company straddles the fence between automobiles and luxury goods, allowing it to generate impressive margins compared to other car companies.

Here is a look at Ferrari’s operating margin compared to rivals like Toyota, General Motors, and Volkswagen:

With a double-digit operating margin, Ferrari is more like a luxury goods company than an automaker. | Source: YCharts

Ferrari’s prestige and Italian panache make its cars almost as profitable to make as luxury handbags, watches, and shoes. That’s great news for investors. According to analysts at Morgan Stanley, the deal could get even sweeter when Ferrari expands into the lucrative markets for SUVs and EVs.

Is Ferrari the New Tesla?

Video: The Ferrari Purosangue SUV

Electric vehicles are one of the fastest-growing automotive markets, with sales projected to expand at a CAGR of 21% until 2030. Ferrari is well-poised to compete in the high-end performance segment of the market that is currently being neglected by rivals like Tesla.

According to Morgan Stanley analyst Adam Jonas, a move into EV will boost Ferrari’s stock price and accelerate sales growth. Here is what he had to say in an analyst note released on Thursday:

We forecast RACE going from 0% EVs in 2020, to 3% in 2025, 20% in 2030, and 50% in 2040.

Jonas also has high hopes for Ferrari’s Purosangue SUV, stating the following:

We expect the unveiling of the Purosangue to be a catalyzing event and an inflection point for the growth trajectory to steepen.

Ferrari’s SUV is expected to launch in 2022, and the company doesn’t expect to have any electric cars in its lineup until at least 2025.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of and should not be considered investment or trading advice from The author holds no investment position in the above-mentioned securities.

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