By Chantal Marx
Ferrari NV-RAC(E)ing ahead of the competition
Ferrari was founded by Enzo Ferrari in 1939. It began producing road cars in 1947. The company listed in 1960 and between 1963 and 2014 it was a subsidiary of Fiat SPA. The business was spun off from Fiat Chrysler Automobiles in 2016. Ferrari produces all its vehicles at its factory complex in Maranello, Italy, where it has been based since 1943.
The company prides itself on its "racing DNA". Its racing team, Scuderia Ferrari, pre-dated the company and has been involved in racing since 1929, first competing (unofficially) in Grand Prix (now Formula One) events in 1933. The team also showcases racing cars in other motor sporting event including Le Mans.
Ferrari is one of the world's strongest brands, and it maintains a brand image built around racing heritage, luxury, and exclusivity. Ferrari offers a model range that includes several supercars, grand tourers, and one SUV. Many early Ferraris, dating to the 1950s and 1960s, count among the most expensive cars ever sold at auction.
Ferrari's business model is unique
The company produces small volumes of cars to a very loyal customer base. Management uses very specific language when speaking about its client base. A person drives a Ferrari to feel something and the typical Ferrarista (Ferrari owner) will have more than one Ferrari - a different Ferrari for a different moment.
Range models are made available to everyone, while special editions are only launched to collectors. Collectors are segregated according to the number of Ferraris they own, the time they have owned a Ferrari, and their event engagement. Approximately 65% of deliveries are made to 5% of the client base.
Ferrari very carefully manages supply with its explicit strategy being to produce one less car than the market demands.
Price points are very high and Ferrarista's are not particularly vulnerable to economic cycles. New launches are typically pre-sold two years in advance. At the end of FY24, the order book was covered through 2027.
Extreme care is taken in delivering special series models, Icona and Supercars. For example, a Supercar launch takes eight to ten years so that it includes enough new technology, and volumes are kept extremely limited. The previous Supercar model, the LaFerrari Aperta, was launched in 2016 to celebrate Ferrari's 70th anniversary. The new F80 (2026 launch) will only have 799 units delivered.
Ferrari does not market explicitly. Instead, it maintains visibility through Scuderia Ferrari, merchandising, and racing events or trips. Launch events are usually private, followed by public unveilings.
Ferrari holds a commanding market share
Ferrari's main competitors are Lamborghini, McLaren, Aston Martin, Rolls-Royce and Bentley, as well as Porsche, Mercedes, Audi, BMW and Land Rover in certain categories (four-door).
Despite limited production volumes, the focus is very narrow. Competitors will typically produce higher volumes spanning other areas of the vehicle market as well. Ferrari holds a 23% market share in the luxury performance car industry and a 14% market share in the enlarged luxury segment (in the top 25 markets).
Ferrari has "Veblen" good qualities
A Veblen good is a good for which demand increases as the price increases. This contradicts the "normal" relationship between price and demand. This phenomenon was first explained by Thorstein Veblen in 1899 in his book The Theory of the Leisure Class.
These goods are usually high-quality, coveted products that the a majority of the population will not or cannot purchase. Veblen goods are generally sought after by affluent consumers who place a premium on the utility of the good - the good makes the consumer feel more exclusive and important, since they are purchasing something of high quality that is out of reach for others.
The companies producing Veblen goods typically have a very strong brand identity that is synonymous with luxury.
Perhaps cementing Ferrari's status as a luxury and Veblen good is its success in the second-hand market and the way they tend to appreciate in price over time. This is in stark contrast to other vehicles that typically lose value "as soon as you drive it off the floor".
Personalisation has helped perk margins
Personalisation or customisation of luxury brands has become increasingly popular - from allowing clients to make colour selection and fabric choices to monogramming. Personalisation is a big and growing part of Ferrari's business and made up ~20% of revenue in 2024, up from 15% of revenue in 2015.
Importantly, personalisation is margin accretive. In Ferrari's case, almost all special and limited series cars are personalised. The practice is less prevalent in range models because they are more likely to be resold.
Financials
Summary investment case
Risks
Consensus considerations
Valuation
Ferrari rightly trades at a premium to its automaker and luxury brand peers. It trades at a discount to Hermes - another company specialising in Veblen good production (although in Hermes' case - it sells handbags in the main), although the discount is narrower than average.
Relative to its own history, the company looks expensive as well. In our view, consensus for FY25 looks a little light on the bottom line (+5.5%), however, even if growth comes in closer to 10%, and the FY26 growth rate is carried forward, the 12-month forward PE of 44 times still looks a little expensive.
We like the company and would still consider a long-term investment despite the elevated valuation, although we would feel more comfortable entering the stock at below €400 if the opportunity comes up.
