Is Ferrari Stock A Buy Now As Charles Leclerc Targets F1 Title, RACE Leads Tesla In This?

With its legendary F1 team and top-notch sports cars, many investors dream of owning shares of Ferrari (RACE). But is Ferrari stock a buy amid the latest Formula One season and as it leads Tesla (TSLA) in a key category? Read on to find out.

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Many investors want to own stocks with a little bit of cachet — and few names are more associated with luxury than automobile maker Ferrari.

One thing is certain: With a new Ferrari SF90 Stradale costing upward of $500,000 and a 2023 Ferrari 812 GTS costing more than $400,000, RACE stock is far more affordable for the average American looking to boast of Ferrari ownership.

Charles Leclerc Falls Behind In F1 Race

Fiat Chrysler, now part of Stellantis (STLA), spun off Ferrari in 2016. While it is known for its sports cars, it is also the oldest and most successful team in Formula One racing.

Ferrari’s standing as arguably the greatest company in motor sport gives it a unique cachet, especially among high rollers.

Its Scuderia Ferrari team has won 16 F1 constructors titles and 15 drivers titles, winning even more fans in the process. Legendary drivers for the team include all-time greats Michael Schumacher, Sebastian Vettel, Alberto Ascari and Juan Manuel Fangio.

The firm has been in a prolonged dry spell, partly due to the recent domination of fellow automotive giant Mercedes. However, Red Bull Racing — long a plaything for the fizzy drink giant’s founder Dietrich Mateschitz — has been the team to beat for the last couple of seasons.

This is partly due to their exceptional lead driver, Max Verstappen, and perhaps even more down to Chief Technical Officer Adrian Newey.

Scuderia Ferrari have responded, axing Team Principal Mattia Binotto and replacing him with Frenchman Frédéric Vasseur.

The team has a highly rated lead driver of its own in Charles Leclerc. He promised to end Ferrari’s 16-year world championship drought at the team’s car launch event in February.

“The goal is to win. I am really looking forward to getting back in the car and trying to win that championship. Last year was a good step forward,” Leclerc said. “We need to do just the same this year and hopefully get that championship. That is the target for the team and for me too, get more wins, be more consistent from the first race to the last race.”

So far though Leclerc’s F1 title challenge has not gone according to plan. He failed to finish the Bahrain or Australian Grand Prix and finished a distant seventh at the Saudi Arabia event. Not only is he well behind championship leader Verstappen, but he is also lagging teammate Carlos Sainz into the bargain.

With another 21 races left in the calendar there is still plenty of time to mount a challenge.

Ferrari Analysis: RACE Leads Tesla Stock

The stock is actionable as it rebounds off the 10-week moving average. It has also moved back into the buy zone of a long cup with handle base. The ideal entry point here is 270.45. Its relative strength line remains near highs.

All-around performance is strong, with its IBD Composite Rating coming in at 92 out of 99. The stock has been on a tremendous run, rising more than 26% so far in 2023.

Earnings are currently the Achille’s heel, which is reflected in its lackluster EPS Rating of 62 out of 99.

Sales grew by 10% in the most recent quarter and Ferrari boasts a 3-year sales growth rate of 13%, IBD data shows.

Analysts see strong earnings growth ahead, however. Full-year EPS is expected to pop 20% in 2023 and 15% in 2024.

Institutional sentiment is positive, with its Accumulation/Distribution Rating of B representing solid buying among funds of late.

RACE currently holds the lead over Tesla stock in the IBD Auto Manufacturers Group, with Ferrari now sitting in pole position.

RACE Stock Has Wide Moat

Due to its unique brand and high-end offerings, analysts believe the car firm has a wide moat.

Stable long-term revenue, addressable market growth, profit margin expansion and robust returns on invested capital are among reasons it is seen as a solid potential investment.

The firm is also expected to show resiliency during periods of economic uncertainty due to its clientele of high-net-worth individuals.

There are obvious signs of robust demand for its products. The firm halted orders for its new Purosangue SUV in November because the wait time had reached at least two years. Existing clients are getting priority on its first production run.

Analysts Back Ferrari Stock

CFRA analyst Garrett Nelson is rating Ferrari stock as a buy with a 314 price target.

“Ferrari remains in a virtuous cycle of strong sales growth, robust R&D investment (around 20% of annual sales), and continued Formula One success-led pricing power,” he said in Feb. 18 research note.

He also said the firm’s decision several years ago not to cap its annual vehicle production at around the 7,000 to 8,000-unit level is “continuing to pay off in the form of top-line growth.”

This has “largely flowed through to the bottom line and allowed it to more easily absorb inflationary pressures,” according to Nelson.

Meanwhile, Ferrari has been named the top stock pick in the U.S. auto space, according to Morgan Stanley (MS). Analyst Adam Jonas has raised his to 310, up from 280 and maintained an overweight rating on shares.

Is Ferrari Stock A Buy Now?

With a strong brand, strong earnings projections and bullish action in 2023, Ferrari is a stock that could be added now by investors keen on the stock.

Investors could also consider adding it to their watchlists so they can buy when another opportunity to buy presents itself.

Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.

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