Ferrari’s Stock (RACE) Reverses At Record Speed – Analyst See’s Buy Opportunity

Ferrari's stock price (NYSE:RACE) had it's steepest single-day decline since the 2016 IPO on Thursday, dropping 11.11% following the release of Q2 earnings.

The stock trades a further 4.5% lower in this morning's pre-market, pulling RACE down to $422 as markets react negatively despite a 6% increase in core earnings coming in line with the street's expectations.

While concerns linger regarding future sales volumes and profitability, RBC Capital analyst Tom Narayan is standing firm, reiterating an Outperform rating and a €500 price target, signaling a potential buying opportunity amid market volatility. With the European price this morning at €370 , this target would reflect a potential upside of 35%.

Taking a look at the financials, earnings showed revenues of €1,787 million, a 4.4% year-over-year increase, with operating profit rising by 8.1% to €552 million, and net profit €425 million. This amounted to an EPS of €2.38.

While shipments remained stable at 3,494 units, revenue growth was primarily driven by strong demand for the 296 Speciale and the initial success of the new Amalfi model.

Management reaffirmed its full-year guidance, expressing confidence despite opting not to raise its 2025 targets, and indicated no major negative impact stemming from new US import tariffs.

The market's apprehension appears linked to concerns raised by analysts at Citi, who questioned Ferrari's capacity to maintain high profitability amidst potential slowdowns in sales volumes and average selling prices. This has shifted the focus to Ferrari's EBIT margin performance in the second half of the year. 

RBC Capital’s Tom Narayan, however, views the selloff as an overreaction. He argues that similar past drops have historically led to swift recoveries, presenting a compelling buying opportunity.

Narayan stated that the company's decision not to raise its 2025 guidance was not concerning, nor were its comments on U.S. residual values and moderated deliveries, viewing these as strategic choices to bolster revenue quality. He believes the market is underestimating Ferrari's brand strength and pricing power.