Ferrari stock price has pulled back in the past few months as some investors question its growth trajectory and demand for its vehicles. RACE has crashed by 10% from its highest level in 2024, meaning that it is in a technical correction. So, is Ferrari a good blue-chip stock to buy?
Ferrari’s business is doing well, but risks remain
Ferrari, the giant luxury vehicle manufacturer, has been one of the best-performing companies in the automobile industry. Its vehicles have seen robust demand, with some of its models, including the F80 supercar and Purosangue SUV being sold out.
This performance is seen in its business growth, as evidenced by the recent financial results. Its revenue rose by 11.8% in 2024 to over €6.67 billion as it shipped 13,752 units during the year.
Ferrari’s third-quarter revenue rose to €1.7 billion as it shipped 3,325 vehicles. Its operating profit jumped to €468 million, while the EBITDA margin moved to 36.7% during the quarter.
The company hopes that its business will continue doing well as some of its models are seeing strong customer demand.
Wall Street analysts are optimistic about Ferrari and its business. The average revenue estimate for the current quarter revenue is €1.79 billion, representing a 12.8% annual growth rate. Ferrari’s annual revenue is expected to move to €7.16 billion, a 7.29% annual rate.
A key challenge, however, is that there are concerns that the company is overproducing is vehicles in a bid to please its shareholders. For example, the firm produced 799 SF90 Stradale and 599 SF90 Spider.
While all these vehicles sold out, third part-party data shows that prices have crashed in the resale market. Also, there are signs that the 12Cilindri is not selling as expected.
The secondary market is important because many Ferrari buyers do so because of the perceived value. Its growth may slow over time with some vehicle types seeing substantial depreciation.
Read more: Why Ferrari’s EV strategy is ahead of Ford and GM
Valuation concerns remains
The other top concern is that Ferrari stock price is highly overvalued considering that its revenue growth is slowing. Ferrari has a market valuation of about $80 billion compared to its annual revenue stands about $7 billion and its profit at $1.58 billion.
These numbers mean that Ferrari has a forward price-to-earnings ratio of 48, much higher than the sector median of 18. Its trailing twelve month (TTM) P/E ratio is 50, also higher than the sector median of 20.
The price-to-earnings-to-growth (PEG) ratio is a crucial number to watch because it considers a company’s growth rate. In this case, Ferrari has a PEG ratio of 2.25, against a sector median of 0.63.
To be clear: Ferrari requires a premium valuation because of its brand, high margins, and its strong balance sheet and returns. However, the company needs to do more to justify this valuation.
Ferrari stock price analysis
The daily chart shows that the RACE stock has been under pressure in the past few months. On the positive side, it has moved above the 50-day and 200-day Exponential Moving Averages (EMA).
The other positive is that the stock has formed a falling broadening wedge pattern, a popular bullish sign This pattern formed after it surged, meaning that it has formed a bullish flag pattern, a popular positive sign.
Therefore, the stock will likely keep rising as bulls target the all-time high of $497, the highest swing in August last year. This price is about 12% above the current level. A break above that level will point to more gains to $500. A drop below the support at $420 will invalidate the bullish view.
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