Ferrari’s recent stock plunge has raised concerns among investors as the company navigates a significant shift towards electric vehicles (EVs). Following a cautious earnings forecast, shares of the luxury carmaker dropped by a record 15 percent in New York on Thursday, reflecting trepidations about the brand’s future profitability in an evolving automotive landscape.
The Italian manufacturer, which has enjoyed a stellar market valuation as a luxury brand since its public offering nearly a decade ago, announced that its adjusted operating profit margin would remain largely flat at an impressive 30 percent over the next five years. This cautious guidance comes as Ferrari scales back its ambitions, indicating that only 20 percent of its models will be fully electric by 2030, a significant reduction from a previously announced goal of 40 percent.
At a recent event in Maranello, CEO Benedetto Vigna urged for “prudence” in maintaining steady growth, emphasizing the need to deliver on promises to investors and customers alike. He stated, “We want to make sure that what we commit, we deliver,” as he addressed an audience of investors and journalists. Chairman John Elkann echoed this sentiment, asserting, “We will keep proving year after year that Ferrari is unique.”
The revised projections have prompted analysts to reassess Ferrari’s market position. According to Bernstein analyst Stephen Reitman, the company’s valuation, now approximately $US77 billion, has taken a hit, losing ground as expectations for further margin growth fell short. He described the guidance as “thin gruel” compared to investor expectations for a robust growth narrative.
Despite the share decline, Ferrari has raised its revenue and profit forecasts for the current year. Zuzanna Pusz from UBS noted that the stock’s recent dip presents a “compelling buying opportunity,” given that Ferrari’s unique business model remains intact. Following the initial drop, shares showed signs of recovery, rising 1.6 percent in premarket trading on Friday.
While the company has not yet detailed the pricing for its upcoming EV model, the Elettrica, market observers are questioning the brand’s ability to maintain high margins as it introduces electric options alongside traditional petrol and hybrid vehicles. Early indications suggest the Elettrica may take the form of an SUV, potentially broadening its consumer base while diverging from Ferrari’s traditional strategy of exclusivity and limited production.
Ferrari plans to release four new models annually, although executives indicated that profit growth will not hinge on increased production volumes. This approach aims to preserve the brand’s reputation for luxury and scarcity, even as it transitions into the EV market.
Many Ferrari enthusiasts remain skeptical about the necessity of an electric model. One passionate owner, Graham Royle, expressed his doubts, stating, “There is no pleasure from a whining electric motor compared to a throbbing V12 or V8 with gorgeous exhaust notes.” Vigna assured that he does not intend to pressure loyal customers like Royle into adopting electric vehicles, but he is optimistic about attracting new buyers with innovative technologies designed to enhance the driving experience.
Ferrari’s marketing chief, Enrico Galliera, reinforced this vision, stating, “This is not an electric car developed by Ferrari. This is a Ferrari powered with an electric power train.” The company aims to distinguish its electric offerings by not only delivering performance but also preserving the auditory experience that traditional Ferrari engines provide.
Amidst these developments, industry analysts like Scott Sherwood speculate that Ferrari might only achieve 10 percent of its models being electric by 2030. This modest prediction suggests that any potential margin dilution from EVs could be offset by the sustained profitability of Ferrari’s high-end supercars, allowing the company to uphold its scarcity model.
As Ferrari navigates this transition, the commitment to its heritage of high-performance combustion engines remains a crucial aspect of its identity, with plans to retain a significant portion of its production focused on traditional powertrains. The coming years will be pivotal as Ferrari balances innovation with the expectations of its devoted fan base while responding to a rapidly changing automotive market.
