Ferrari at a Crossroads: Premium Price, Durable Franchise - A Tactical Long

Hook - thesis

Ferrari is not a cyclical commodity play. It is a carefully managed luxury house that uses scarcity and brand mystique to protect pricing power. That explains why the stock routinely trades at premium multiples and why investors worry about valuation. Still, beneath the headline price is a resilient cash engine: high average transaction prices, a rising dividend program, and active buybacks - all signs of capital discipline that matter now.

My read: the market's concern about a premium valuation is fair, but it understates the durability of Ferrari's revenue mix and shareholder returns. The balance of evidence supports a tactical long from current levels for investors comfortable with concentrated luxury exposure. Below I outline why, the trade plan (entry, stop, targets), catalysts to watch and the risks that would invalidate the call.

What Ferrari does and why the market should care

Ferrari designs, engineers and manufactures some of the worlds most expensive luxury cars. The company deliberately controls supply to keep demand ahead of inventory, effectively creating scarcity that fortifies margins and brand equity. In 2024 Ferrari sold 13,752 vehicles at an average price above EUR 480,000. More than 70% of those vehicles were sold to existing Ferrari clients - a sign of strong retention in the highest end of the market.

Revenue mix matters: about 86% of revenue comes from cars and spare parts, while sponsorship, commercial and brand activities account for roughly 10%. Geographically, Ferrari is diversified across premium markets with 47% of revenue from Europe, Middle East and Africa, 33% from the Americas and a smaller but still meaningful exposure to mainland China, Hong Kong and Taiwan at 8% (rest of Asia 12%). That geographic spread reduces single-market dependence while keeping exposure to the wealthy consumer segments that drive demand.

Capital returns and shareholder alignment

Shareholder returns are a material part of the bull case. Ferrari has grown its dividend steadily: the most recent declared cash dividend was EUR 2.986 per share (declaration date 02/20/2025; pay date 05/06/2025). The company also announced completion of a prior multi-year buyback and the first tranche of a new multi-year buyback program on 12/16/2025. Ownership stability received a positive governance signal from a shareholders' agreement referenced in a 01/03/2026 press release involving Exor and the Ferrari family. In short, management is returning cash and taking steps to stabilize the ownership base - two pro-shareholder developments the market typically rewards.

Price action and valuation framing

Ferrari's share price has been volatile over the last 12 months. The 12-month high in the available series is roughly 517.56, while the low printed around 363.50. The most recent close available in the snapshot is 370.85. That tells us two things: 1) the market has priced in both optimism and downside scenarios over the past year, and 2) there is demonstrable upside back toward prior highs if positive fundamentals and buyback momentum continue.

Market cap is not included in the available snapshot, so I am not presenting a precise multiple. Qualitatively, Ferrari trades at a premium to most auto OEMs due to scarcity, brand strength and enviable profit per vehicle. That premium can be justified if delivery volumes remain disciplined, ASPs stay elevated and margin mix is protected by parts and brand revenue. However, the premium exposes the stock to macro shocks to luxury spending.

Trade idea - actionable plan

Trade direction: Long RACE (tactical position)
Time horizon: Position - 3 to 12 months
Risk level: Medium

Entry (staged):
 - Tranche 1: 360 - 375 (current area around 370.85)
 - Tranche 2: add on pullback to 340 - 350 or on breakout above 420

Stop loss (hard):
 - 330 (one-shot stop) - if price closes below 330, cut for loss control (~10% below current)
 - Or use 3% trailing stop per tranche after initial gain

Targets:
 - Target 1 (near-term): 480 (~30% from current) - prior congestion and psychological resistance
 - Target 2 (mid-term): 520 - back toward the post-IPO/earlier highs
 - Target 3 (bull case): 600 - if buybacks accelerate and order strength persists

Position sizing & risk: limit initial allocation to 2-4% of total portfolio value (size to investor risk tolerance). Expect 15-25% position volatility; keep total allocation modest relative to core holdings.

Trade rationale

Buying around the mid-360s to 370 area captures a balance between valuation caution and exposure to positive operational and corporate outcomes: continued buybacks, dividend growth, and orderbook resilience backed by wealthy repeat buyers. The 330 stop sits under a visible structural support zone in recent price history and limits downside to roughly 10% from the current close. Targets are calibrated to prior highs and to a scenario where buybacks and cash returns improve per-share metrics.

Catalysts to push the trade higher

• Share buyback activity accelerating - the company announced the first tranche of a new multi-year buyback program on 12/16/2025. Additional tranches or faster repurchases would materially boost EPS and per-share cash metrics.
• Stronger-than-expected order intake or reveal of a healthy backlog - Ferrari's model of limited supply means order strength translates into sustained pricing power and better forward visibility.
• Dividend increases or special distributions - dividend progression through 2025 shows management tolerance for higher cash returns; further increases would change investor math.
• Positive governance clarity from shareholder arrangements - the 01/03/2026 press release on shareholder agreement reduces perceived ownership risk and could attract investors concerned about control dynamics.

Risks and counterarguments

No trade is risk free. Below are the principal reasons this idea could fail along with a brief counterargument to my constructive stance.

• Macro hit to luxury consumption - a meaningful slowdown among high-net-worth consumers would depress orders and secondary-market demand. Ferrari's scarcity strategy can only do so much if buyers pause. This is the top tail risk and would likely compress the valuation premium quickly.
• Electrification and product risk - the luxury transition to electric drivetrains is real. If Ferrari missteps on execution, timing or customer acceptance of new electric models, its brand premium could erode over time. The market often penalizes perceived product misdirection even when balance sheets are strong.
• China and regional exposure - while China is only ~8% of revenue, a sharp slowdown there or geopolitical friction would remove a growth tail and hurt sentiment in the stock.
• Valuation vulnerability - the premium multiple implies low tolerance for disappointment. Any negative surprise on margins, margin mix or guidance could produce outsized downside relative to absolute earnings moves.
• Currency and dividends - dividends are declared in EUR while the share trades in USD. Currency swings and tax/treatment changes could alter the attractiveness of declared distributions.

Counterargument - The skeptics are correct that Ferrari is expensive on a headline basis and that a macro shock could remove the valuation premium. If you believe luxury is inherently cyclical and that electrification will homogenize performance-brand differentiation quickly, you should avoid a long. You could make a credible short case if you expect a rapid deceleration in order flow or materially higher discounting on used Ferrari inventory.

What would change my mind

• If management halts buybacks and pivots to heavy capex without a credible path to higher volumes or better margins, that would materially weaken the case for a premium multiple.
• Evidence of sustained order cancellations or a clear softening in repeat-buyer behavior would also invalidate the thesis that demand remains above supply.
• A marked deterioration in margins - specifically an erosion in car and spare parts contribution - that cannot be offset by brand activities would be a red flag.
• Large insider or family selling that suggests control instability would force a reassessment.

Final thoughts and stance

I am constructive on Ferrari from a tactical perspective. The business has structural advantages - scarcity, high ASPs, repeat clientele and demonstrable shareholder returns through dividends and buybacks. These attributes justify paying a premium, in my view, but they do not make the stock immune to macro cycles or execution missteps. The trade is therefore sized as a tactical position with a clear stop beneath structural support and realistic upside targets tied to prior market levels.

If you buy, do it in tranches, size to risk tolerance and keep an eye on buyback cadence, orderbook signals and dividend policy. If those items turn negative, respect the stop and revisit the thesis later. If they turn positive, the path back to 480 and toward 520 becomes much more likely.

Disclosure: This is a trade idea and not individualized financial advice. Position sizes should be matched to your portfolio risk budget and investment horizon.