Ferrari (RACE) stock price has done well this year, rising by 40%, and making it one of the best-performing players in the automobile industry. It rallied to a record high of $497.68 on September 3, bringing its valuation to almost $90 billion.
Ferrari’s performance is significantly different from other premium automakers like Porsche and Aston Martin. Porsche, a well-known luxury automaker, has fallen by over 30% from its highest level this year. Similarly, Aston Martin Lagonda (AML) has crashed by 70% from last year’s highs.
Ferrari has also beaten other popular automakers like Toyota, Tesla, General Motors, Ford, and Stellantis.
Modest growth
Ferrari’s stock performance happened at a time when its revenue growth has been relatively modest. Its annual revenue in 2023 came in at $6.5 billion, higher than the $5.4 billion it made in the previous year.
Ferrari’s strong pricing power has also made it one of the most profitable automakers brands in the industry. Its annual profits have moved from $780 million in 2019 to over $1.38 billion last year.
The company’s performance is mostly because of three main reasons. First, unlike other mainstream automakers, it is not at risk of disruption from Chinese companies like BYD, NIO, and XPeng, which focus on the mainstream market.
Instead, Ferrari’s business is secure, a trend that will continue as the number of wealthy individuals continue to rise in the coming years. This trend explains why most of its recently announced vehicles have attracted substantial demand. Some of its recent launches are 12 Cilindri and Ferrari F80, which is the successor to LaFerrari.
To be sure, the latter has been criticized by many enthusiasts because of its appearance and the fact that it comes with a V6 engine. Still, there are signs that the vehicle is doing well in the market. Its order book has moved all the way to 2026.
Ferrari has also done well because of its focus on internal combustion engines (ICE), which are doing better than electric vehicles today. To be sure: Ferrari is still working on its EV, but the management has put most of its investments in the ICE business.
Additionally, Ferrari Racing segment is doing well. The company won the 24 hours of Le Mans, and is on track to be second or even first in Formula 1, where it is position 2 after McLaren. It is also beating Red Bull.
Ferrari is also less exposed to the geopolitical issues in the United States and China. It will likely be less impacted by the upcoming US election since it is an Italian brand.
Ferrari earnings ahead
The next important catalyst for the Ferrari stock price will come out on Tuesday when it publishes its financial results.
The last financial results showed that Ferrari’s revenue rose to 1.7 billion euros, while its EBITDA moved to 669 million euros. Its net profit came in at 413 million euros during the quarter.
This growth came as the company shipped 3,484 cars during the quarter, a small increase from the 3,392 it sold in the same period last year. Most of its shipments went to the EMEA region, followed by the Americas, Rest of the World, and China.
Analysts expect that Ferrari’s revenue will be $1.78 billion, while its earnings per share rose to $2.16. Its annual revenue is expected to come in at $7.2 billion, a 13.5% increase from the same period in 2023.
The key concern for Ferrari is that its valuation has become stretched. While the company deserves a premium, its valuation metrics are out of this world.
Ferrari has a forward price-to-earnings ratio of 55, higher than the sector median of 18.40. Its non-GAAP PE ratio is 57.7, higher than the sector median of 14.50. These numbers are much higher than other premium companies that are doing well.
For example, Microsoft has a forward P/E ratio of 31.2, while Amazon has a multiple of 39. Most notably, Ferrari is more expensive than NVIDIA, which has a forward multiple of 49.60.
Ferrari stock price analysis
RACE chart by TradingView
The daily chart shows that the RACE stock price has been in a strong bull run in the past few months. It has constantly formed a series of higher highs and higher lows.
Also, the stock has moved above the 50-day moving average, making it one of the best-performing companies.
However, there are signs that it has formed a double-top pattern, a popular bearish sign in the market. In most periods, this pattern is followed by a strong bearish breakout.
Therefore, the Ferrari stock price will likely pull back after its earnings on Tuesday. If this happens, it will likely drop to the neckline at $446.41, its lowest point on October 3. On the positive side, a break above the double top point at $497 will point to more gains.
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