Stock of the Week: Ferrari

The luxury carmaker has a valuation as rich as its customers

James Gard 5 November, 2021 | 11:17AM
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Stock of the week post-it

Our stock of the week poll asked our Twitter followers to choose from a range of companies reporting in the last few days. This week it was a close race between Japanese computer games company Nintendo (7974) and Italian luxury car firm Ferrari (RACE), but “the prancing horse” has made it across the line. Ferrari is closely associated with Formula 1 and the red sports cars that cost around the price of the average UK house (£271,000 as of July). It’s clearly an iconic brand but are the shares a good investment?

Ferrari traces its history back to before the second world war but made its public debut on the stock exchange in October 2015, when shares were priced at $52 in New York. Since then they have motored upwards to $257 (or €228 for the European listing). Morningstar autos analyst Richard Hilgert thinks the shares are pretty racy in terms of valuation too, assigning the stock a 1-star rating and a fair value of $131 or €113. He assigns Ferrari a wide economic moat because of its brand strength and perception that its cars are only accessible to the truly wealthy, whose numbers are growing globally every year. “The evidence of Ferrari's economic moat stems from stable growth throughout economic cycles, pricing power, consistently high profitability, and a brand that captures the imagination of many around the world, but a price that only high-net-worth individuals can afford,” Hilgert says.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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James Gard  is content editor for Morningstar.co.uk