Down 29% in 6 Months, Is Ferrari Stock a Buy?

Revenue rose 8% on a constant-currency basis in 2025, while management's 2030 target of ~€9.0bn (from €7.15bn in 2025) implies a 5% CAGR over the next five years. Operating margin expanded 120 bps to 29.5% and industrial free cash flow increased ~50% to >€1.5bn, supported by a pre-sold F80 supercar rollout that will ramp through 2026 and an order book extending toward end-2027. Shares are down ~29% over six months and trade at about 33x earnings, but shareholder returns are being boosted by a 21% dividend increase and a €3.5bn buyback through 2030, making the name a cautious long-term buy despite muted near-term top-line guidance.

Analysis

Scarcity-driven luxury models create very different supplier and aftermarket dynamics than volume autos: the real winners are low-volume, high-content suppliers (carbon-composite shops, bespoke powertrain electronics, specialty calibration houses) and the certified-pre-owned/auction channels that capture pricing upside when new supply is deliberately constrained. Dealers and service networks also enjoy asymmetric economics — limited new inventory gives them leverage on used-vehicle pricing and service retention, concentrating margin in the aftermarket over a multi-year window.

Primary risks live in execution and demand elasticity rather than product desirability. A hiccup in ramping complex, low-volume models (quality holds, parts bottlenecks, regulatory homologation) would compress near-term gross margins quickly because fixed costs don’t scale down with deliberately capped volumes; conversely, order-book burn-off without replenishment would create a revenue trough even if pricing power persists. Macroeconomic shocks that change ultra-high-net-worth spending patterns, or progressive wealth taxation/tariff moves targeting luxury imports, are plausible tail events on a 12–36 month horizon.

The market appears to have priced headline top-line conservatism but under-weights per-share compounding from structural EPS leverage and optional balance-sheet actions. That creates asymmetric payoffs for structures that capture long-dated operational optionality while capping near-term downside. Monitor three near-term readouts — production ramp quality reports (next 3–9 months), order-book replacement rate (quarterly), and any change in buyback execution pace — to re-rate position size or move to outright short exposure if all three deteriorate in tandem.

Key Decisions for Investors

• Core-construct: Buy RACE sized 3–5% of equity risk budget with staggered entries over 6–10% price bands; hedge with a 12-month 15% OTM put (cost-funded by selling a 12-month 10–15% OTM call). Timeframe 12–36 months; reward = steady EPS/total return compounding if execution stays intact; max loss = stock fall to put strike minus premium paid (~defined).
• Convex LEAP: Buy a 24-month RACE call spread (long ATM LEAP, short ~30–35% OTM) sized to 1–2% of portfolio to capture multi-year re-rate while capping premium at known cost. Timeframe 18–30 months; upside >3x if market re-prices EPS optionality, downside limited to premium paid.
• Macro pair hedge: Long RACE / short XLY (equal notional) for 12 months to isolate scarcity/pricing vs broad discretionary cyclicality — reduces beta to macro demand. If luxury scarcity holds, expect spread to widen; if macro shock hits luxury consumption broadly, pair limits net portfolio drawdown.
• Event trigger plan: Reduce or flip to short RACE if quarterly data show (1) production ramp quality degradation, (2) order-book replacement rate <50% vs prior cadence, and (3) margin guidance cut — any two occurring within a single quarter should prompt trimming to zero and reassessment within 30 days.