Why Ferrari Stock Is Off to the Races Today

Shares of premium automaker Ferrari (RACE 12.29%) — what else? — “raced” 12.5% higher through 11:50 a.m. ET on Thursday, after beating analyst earnings forecasts.

Heading into the fourth quarter, Wall Street had forecast that Ferrari would earn about $1.31 per share on just under $1.5 billion in quarterly sales. This morning, Ferrari announced its earnings were actually $1.76 per share (1.62 euros, in local currency), and its sales came in 10% ahead of expectations at $1.65 billion.

Ferrari sales and earnings

For the quarter, Ferrari managed to turn a 2% decline in cars shipped into an 11% increase in revenue and a 25% increase in operating profits. Operating profit margin tacked on 260 basis points, rising to 24.4% (Tesla is only earning an 8.2% operating profit margin). And earnings per share surged 34%.

For the full year, Ferrari grew shipments by 3%, sales by 17%, operating profits by 32%, and earnings per share by 36% — $7.49 per share.

What to expect from Ferrari in 2024

Ferrari CEO Benedetto Vigna was able to declare 2023 “a very successful year” for his car company — and Ferrari doesn’t plan to remove pedal from metal in 2024, either.

The company forecast 7% sales growth in the new year, to about $6.9 billion. Management didn’t give generally accepted accounting principles (GAAP) guidance for its earnings, but predicted that, adjusted for one-time items at least, its euro-denominated profits should approach $8.14 per share — growth of about 9% — assuming operating profit margins similar to last year.

All this being said, however, at a share price of about $391, that implies a forward P/E of 48x earnings for Ferrari stock. And as great as the company performed in 2023, with earnings growth of only 9% anticipated in 2024, that seems too high a price to pay.

If you owned Ferrari stock in 2023, my congratulations on a fabulous year for this premium car company — but I wouldn’t buy this premium-priced stock today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

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