Ferrari‘s (NYSE:RACE) a stock I’ve had in my ISA for quite some time now. Over the years, I’ve usually taken the opportunity to buy more shares whenever the iconic Italian carmaker’s stock hit a noticeable speed bump.
We’ve got one of those now, as Ferrari has nosedived 35% since July. Yet it’s still up 64% over five years and 550% since IPO in 2015 (with dividends on top). So buying the dip has worked out well for investors in the past.
But with Ferrari’s first full EV really dividing opinion, should I buy more shares? Or even sell?
A radical departure
I’m sure Ferrari needs no introduction as it’s one of the world’s premier luxury goods company, with incredible profit margins and a unique brand. Due to their scarcity and powerful roaring engines, the vehicles still turn heads today.
Now, looking back at my original investment notes, I flagged the pivot to electric vehicles (EVs) and potential brand damage as risks to monitor moving forward. These are flashing for me now after the firm unveiled its first EV — a five-seater called Luce — earlier this week.
After seeing the photos, I was quite shocked, as this is a massive departure from the brand’s DNA and aesthetic. Rather than having a fierce road presence, this is the sort of family car I’d expect to see nipping down to the local Co-Op.
EVs will make up 20% of Ferrari’s global sales by 2030. But the Luce is set to start at €550,000 (roughly £470,000). Will there be much long-term demand at that price? Will it hold its resale value? These are, of course, unanswered questions.
Moreover, I worry that having the Prancing Horse logo on this experimental design will damage the brand. If a Ferrari doesn’t look at all like a Ferrari, what’s the point? One analyst called it a “mix between a Honda Accord EV and Tesla 3“.
Finally, there’s a risk Ferrari might not recoup the significant R&D costs of this car. It reminds me of Jaguar’s EV concept car launched a while back — that also polarised opinion.
Am I overreacting?
Of course, I could be wrong, as some people seem to like the car. Sir Jony Ives, the former Apple design chief behind the iPhone and iPad, was involved in its minimalist design.
The firm says it’s “an entirely new Ferrari” (more for families than traditional ‘ferraristas’). And it certainly has lots of innovative tech features inside, so could sell well with new customers in China’s massive EV market.
Plus, the Luce can do about 193 mph, so that would set it apart in the Co-Op carpark.
Should I buy more shares?
After the unveil, the stock dropped 6%, leaving it trading at 26.8 times next year’s forecast earnings. That’s a noticeable discount to previous years, though probably reflects US tariffs, EV uncertainty, a steadier growth profile, and a fragile luxury market.
Weighing things up, I’m going to give Ferrari the benefit of the doubt here. The fundamental business model remains rock-solid and Ferrari’s order book extends towards the end of 2027, indicating there’s no immediate demand problems.
Ferrari remains a high-quality compounder, in my opinion. For now though, I’ll focus on cheaper stocks where I see better value.
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Ben McPoland owns shares of Ferrari.
