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Why Ferrari Stock Is Worth 12 Times More Than Tesla: Status

Société Générale analyst Stephen Reitman upgraded shares of iconic auto maker Ferrari to Buy from Hold and increased his price target by almost 30% to $183 a share.

Ferrari (ticker: RACE) isn’t like other auto makers. It behaves more like a luxury-goods stock, trading for 35 times estimated 2020 earnings, far better than the 9.7 times multiple for the Russell 3000 Auto & Auto Parts Index.

Of course, it could also be argued that Ferrari is more than a car. It is a status symbol. The car maker, by some measures, is worth more than 580 times Ford (F) and more than 12 times another highly valued luxury auto maker: Tesla (TSLA). The Italian company illustrates the benefits of pursuing and up-up market strategy—selling a limited number of ultrahigh-end products to the superrich.

These two charts together show how Ferrari compares with the entire auto industry.

Of course, Ferrari does earn nonautomotive gross profits, and again its profitability is more like a luxury-goods maker. The gross profit margin at Tiffany (TIF), for instance, is more than 60%.

Ferrari’s margins are a little below Tiffany’s, but Reitman upgraded the stock, in part, because he expects margins to improve with the introduction of new hybrid-electric models that will retail for about $450,000.

Ferrari stock doesn’t trade like other auto makers, either. The stock is up about 60% year to date and has returned about 51% a year on average for the past 3 years, far better than the 14.5% return of the Dow Jones Industrial Average over the same span. Automotive stocks have lagged far behind, rising about 3.5% year to date and just 1.8% a year over the past 3 years.

Ferrari stock may keep working from here, like Reitman thinks it will. But it won’t be because auto sales rebound, it will be because the rich keep liking status.

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