CFRA downgrades Ferrari stock to Sell on growth concerns

CFRA downgraded Ferrari (NYSE:RACE) from Hold to Sell, reducing its price target to $350 from $475, citing concerns over a significant slowdown in growth and a "frothy valuation." The firm noted Q2 2025 results showed only 0.3% shipment growth and 4.4% revenue growth, missing analyst expectations, and lowered future EPS estimates, suggesting a "valuation disconnect" where stock performance has outpaced earnings. Despite Ferrari's strong financial health, CFRA believes the combination of decelerating growth and an elevated P/E ratio justifies the revised rating, signaling potential headwinds for the luxury automaker's market premium.

Analysis

CFRA has issued a significant bearish call on Ferrari (RACE), downgrading the stock from Hold to Sell and cutting its price target by over 25% to $350.00. The primary driver for this revision is a marked deceleration in growth, evidenced by Q2 results where shipments grew a mere 0.3% year-over-year and revenue increased by only 4.4%, a stark slowdown from the 12.36% trailing twelve-month revenue growth. This performance, coupled with a recent Q2 2025 earnings report that missed both EPS and revenue forecasts ($2.38 vs $2.40 expected; $1.79B vs $1.82B expected), supports the thesis that the company's growth is stalling. CFRA has consequently lowered its adjusted EPS estimates for 2025 and 2026, signaling a lack of confidence in Ferrari's ability to meet market expectations. The downgrade also highlights a critical valuation concern, describing the stock's 43.27x P/E ratio as a "frothy valuation" and a "disconnect" from underlying earnings. The new price target is predicated on a 2026 P/E of 30x, well below the stock's 10-year average forward P/E of 40x, indicating a belief that the market premium is no longer justified. Despite these headwinds, it is noted that Ferrari maintains strong financial health, with robust cash flows and moderate debt levels.

Key Decisions for Investors

• Investors should critically re-evaluate long positions in Ferrari due to the confluence of a significant analyst downgrade, decelerating growth metrics, and a valuation that appears disconnected from near-term earnings potential.
• Monitor future earnings reports closely for any reversal in the decelerating trends, specifically focusing on shipment volumes and revenue growth rates to see if they can re-accelerate toward their historical double-digit pace.
• Consider the potential for further multiple compression, as CFRA's price target is based on a 30x forward P/E, a notable discount to the stock's 10-year average of 40x, suggesting the premium valuation is at risk if growth continues to disappoint.