Ferrari Beat Estimates. So Why Is the Stock Down?
Key Points
Despite lower deliveries, Ferrari topped analyst estimates.
Rival Lamborghini canceled its first full-electric vehicle, citing low demand.
Ferrari is supporting its residual values by focusing on value, rather than volume.
Despite the Iran conflict threatening to slow Ferrari (NYSE: RACE) in the first quarter, the iconic supercar maker still beat earnings estimates. Ferrari also confirmed its full-year guidance, suggesting its strategy to bring forward certain deliveries in other regions has mitigated any impact in the Middle East, which remains an important luxury goods hub. While Ferrari topped estimates, the stock continued its year-long slide lower.
What's got investors so anxious?
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By the numbers
Ferrari delivered 3,436 vehicles during the first quarter, which was down a modest 157 vehicles from the previous year. Despite a slight decline in shipments, Ferrari posted a 3% increase in revenue to 1.85 billion euros, or $2.16 billion, topping analysts' consensus estimates of 1.83 billion euros. It was a similar story for adjusted earnings per share, which checked in at 2.33 euros per share, ahead of the 2.31 euros per share expected by analysts.
Ferrari's F80 has helped power financial results. Image source: Ferrari.
Part of Ferrari's slide lower could stem from investor concerns that pulling some deliveries forward to offset the disruption in Iran could hinder earnings for the rest of the year. However, Ferrari mostly squashed that notion when it confirmed its full-year guidance of 9.45 euros in adjusted earnings per share on net revenue of 7.5 billion euros. Further, Ferrari's strong sales mix and demand for personalization supported margins.
What's likely to have investors a bit anxious is the premiere of Ferrari's Luce, the automaker's first full-electric vehicle, in a couple of weeks. Ferrari is taking a risk that there will be demand for such a high-end electric vehicle, especially at a time when rival Lamborghini canceled its first full-electric vehicle, the Lanzador, and will shift the concept into a plug-in hybrid. Concerning investors, Lamborghini said interest in a full-electric vehicle in its target market was "close to zero."
What it all means for Ferrari stock
The Luce will be a true test of Ferrari's pricing and brand power as wealthy consumers generally buy a Ferrari knowing its residual value will remain high, but that could waver if demand for a high-end electric vehicle is weaker than expected. Ferrari's initial strategy will be to price the Luce at about 550,000 euros, according to Automotive News sources. That price tag will put the EV above the company's popular Purosangue, which starts at roughly 450,000 euros.
It's really a continuation of Ferrari's broader strategy to keep prices and values high, rather than targeting volume sales. Despite some uncertainty around the Luce premiere, Ferrari's order book extends into the end of 2027, and investors should expect consistent, strong results in the near term.
Daniel Miller 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.