Key Points
Ferrari’s pricing power and impressive margins don’t fit the description of a typical automaker.
With its limited vehicle supply, this company's primary objective is to keep demand elevated, which fosters brand vitality.
The market is presenting investors with a chance to buy shares at a price-to-earnings ratio that’s below the 10-year trailing average.
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No investor likes to navigate a volatile market environment. However, this is the time to be aggressive. There could be lucrative opportunities, which might not have been attractive previously, that are worth a closer look.
Ferrari (NYSE: RACE) is one such business that should be on your radar. This luxury stock, up 759% in the past decade (as of April 13), trades 31% off its peak today. And it's well below $400 per share.
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Is it time to buy Ferrari?
Image source: The Motley Fool.
Ferrari is not like other automakers
The automotive industry is generally not a good place to look for long-term investment ideas. Cyclical demand, huge capital requirements, low growth and profits, and intense competition aren't favorable traits.
This is not the right way to describe Ferrari, though. The Italian car company should be viewed as a luxury brand, as its supercars are targeted toward the wealthiest people in the world. Besides an intense focus on its racing heritage that drives vehicle design, performance, and technical attributes, Ferrari's operating strategy emphasizes scarcity more than anything else.
The goal is not to sell as many cars as possible. The goal is to maintain the brand's status. This supports incredible pricing power. Ferrari's order book, which is accounted for until the end of 2027, fills up years before cars are delivered to customers, ensuring there's a deep waiting list. And some models, like the Ferrari F80, start out with seven-figure price tags. These are viewed as rare collectibles.
Don't take my word for it. Just look at Ferrari's financials. In the past decade, the company's gross margin and operating margin have averaged a jaw-dropping 50.8% and 24.7%, respectively. And its net revenue is up 149% during that time, demonstrating a stable ascent.
This stock is deserving of a premium valuation
Since Ferrari is in a league of its own in the auto sector, its valuation should not be viewed alongside others. This company deserves to be viewed in isolation simply because it's a unique operation that has proven its worth historically. Therefore, a valuation that looks expensive for peers might actually be a compelling entry point with this business.
I believe this is the case right now. Ferrari's share price is down 31% compared to its record high. The market punished the stock following management's announcement of long-term guidance in October 2025, which called for slower-than-anticipated growth through the rest of the decade. This drawdown was overblown.
Investors can purchase the stock today by paying a price-to-earnings (P/E) ratio of 35.2. This is a historically cheap valuation. In the past 10 years, the P/E multiple has averaged 41.1.
With the share price firmly below $400, the market is presenting investors with a rare opportunity to buy a dominant company with a powerful brand, pricing power, and steady financial gains. It's time to add Ferrari stock to your portfolio.
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 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.
