Ferrari drives higher on better-than-expected earnings

Ferrari beat expectations in Q4 and FY2025, with Q4 net revenue of €1.8bn versus a €1.77bn consensus and Q4 net profit of €381m versus a €374m forecast; FY2025 revenue rose 7% to €7.15bn while EBIT increased 12% to €2.11bn (29.5% margin), and net profit was €1.6bn with diluted EPS of €8.96. Management issued 2026 guidance targeting ~€7.5bn in revenues and a 39% EBITDA margin driven by product mix, and noted a disciplined order book extending into late 2027; the results pushed US-listed shares up about 9% on the beat and upbeat outlook.

Analysis

Market structure: Ferrari's beat and guidance crystallize a tighter supply/demand balance in the ultra-luxury auto niche — order book into late‑2027 implies constrained annual deliveries and sustained pricing power, benefiting RACE (and high-margin suppliers like Brembo) while pressuring mass-market OEMs that compete on volume. Expect near-term investor rotation into luxury autos and Italian suppliers; price discovery will be driven by margins (EBIT 29.5% in 2025; company targeting ~39% EBITDA in 2026) rather than unit growth.

Risk assessment: Key tails include a macro shock that erodes discretionary spending (sales down >20% in 2 quarters), accelerated EV regulatory costs requiring €500m+ incremental capex, or large order cancellations from affluent clients; these would compress margins and reset orderbook visibility. Immediate (days) effect is earnings pop and IV movement; 3–12 month horizon hinges on product cadence and capex; multi‑year outcome depends on EV transition clarity and China wealth trends.

Trade implications: Favor concentrated, size‑controlled exposure to RACE: asymmetric payoff via 9–18 month call spreads and covered‑call overlays to monetize elevated IV; consider pair trades long RACE vs short VWAGY to express premium capture vs mass OEMs. Reweight portfolios toward luxury autos/suppliers (+100–200 bps) and underweight broad EV/battery names (-100–200 bps) until capex disclosure; use stop losses (‑10% to ‑12%) and take‑profit bands (+15–25%).

Contrarian angles: Consensus overlooks durability risk of a 39% EBITDA target — achieving that requires continued mix shift to ultra‑high margin models without capex drag; if EV investments accelerate, margin guidance is vulnerable. The 9% intraday rally could be overdone vs modest revenue guidance (~€7.5bn for 2026), so prefer option structures that cap downside while keeping upside participation.

Key Decisions for Investors

• Establish a 2% long position in RACE (NYSE:RACE) sized to portfolio risk tolerance within 1–3 weeks; target +20% return over 6–12 months, set stop‑loss at ‑12% and trailing stop at 8% after +10% gain.
• Buy a 9–15 month RACE call spread (buy ATM+10% call, sell ATM+30% call) sizing to 1.5–3% notional to capture upside while limiting premium; roll or unwind if implied vol drops >25% or stock rallies >30%.
• Implement a pair trade: long RACE 2% vs short VWAGY 2% (Volkswagen ADR) to express luxury premium over mass market; rebalance if spread moves unfavorably >10% within 3 months or on VWAGY corporate news.
• If already long RACE, sell 30–60 day covered calls 8–12% OTM to harvest premium; if assigned or stock rises >15%, roll calls up and out or lock in 15–25% realized gain and redeploy.
• Reduce or exit new long exposure if Ferrari publishes an EV/capex roadmap in the next 60–90 days showing incremental annual capex >€500m or guidance shortfall >3% revenue or >200bps margin vs current targets.