Ferrari N.V. (RACE)
Business Summary
Ferrari N.V. (RACE) is a luxury performance automotive manufacturer headquartered in Maranello, Italy, renowned for its iconic brand, craftsmanship, and racing heritage. The company designs, engineers, and produces high-performance sports cars that embody exclusivity, innovation, and Italian design excellence. Ferrari’s business model focuses on maintaining controlled production volumes to preserve brand scarcity and pricing power, resulting in strong margins and resilient demand across economic cycles. Beyond vehicle sales, Ferrari generates recurring revenue from personalized customization, licensing, and lifestyle products, reinforcing its premium positioning. With a strategy centered on electrification, innovation, and brand prestige, Ferrari continues to deliver robust profitability and shareholder value in the ultra-luxury automotive segment.
Moat Analysis
Ferrari benefit’s from the following forms of competitive advantage, ranked in order of our estimated impact:
Intangible Assets (Brand). Ferrari’s brand is one of the most powerful and recognizable in the world, symbolizing luxury, performance, and exclusivity. Rooted in decades of Formula 1 success, the brand evokes emotional status that few competitors can match. Ferrari commands premium pricing, maintains exceptional customer loyalty, and sustains strong demand even in fluctuating economic conditions. In general, brand equity provides a competitive advantage in two ways: (a) when a business can sell a comparable product or service at a premium— we call this “bottom-line impact”; or (b) when customers choose the product or service over competitors based on brand recognition—we call this “top-line impact”. Ferrari is one of the largest, most impactful, examples of brand, as a competitive advantage, in the markets today - and would benefit from both top and bottom line impacts, as a result.
Cost Advantage (Economies of Scale). Ferrari benefits from economies of scale in a more selective and strategic way than mass-market automakers. While the company deliberately limits production to maintain exclusivity, it still achieves efficiencies by spreading its high research and development (R&D), engineering, and tooling costs across multiple models that share core platforms, engines, and components. This approach reduces unit production costs without diluting brand scarcity. Ferrari also leverages economies of scale through supplier relationships—its consistent demand for specialized materials and parts allows for more favorable pricing and reliable access to premium components. Additionally, as Ferrari expands into hybrid and electric technologies, shared R&D across vehicle lines enhances cost efficiency and innovation speed. In short, Ferrari’s economies of scale operate not through volume, but through shared technology, process efficiency, and supplier leverage, all while preserving the exclusivity that defines its brand.
Valuation Analysis
While we can usually confidently define quality through competitive advantage, we strive to only approximate what might represent a “reasonable price”. We prefer to look at metrics and compare against its own 5 year average and 10 year average, and a modified basket of high quality businesses.
Five (5) year range of Enterprise Value/Net Income for Ferrari stock equals approximately: 32x-62x.
Ten (10) year range of Enterprise Value/Net Income for Ferrari stock equals approximately: 19x-62x.
Average P/E for MSCI All Country High Quality Index: 31x
Current Enterprise Value/Net Income for Ferrari stock equals approximately 41x.
Current P/E for Ferrari Stock equals approximately 40x.
Conclusion: Based on these valuation metrics, Ferrari stock is currently trading near the mid-range of 5/10 ranges and at a premium to other high quality stocks. We would define “reasonable price” for Ferrari in the range below $320USD, based on current fundamentals. We should note that great company’s like Ferrari, rarely go on discount. Investors who are interested in owning this stock need to weigh risk/reward and might need to be comfortable with “averaging-in” to a position. We recommend this strategy when starting positions in great companies - especially when they are trading at elevated valuations.