Recent share performance and business scale

Ferrari (NYSE:RACE) has drawn investor attention after the stock declined about 14% over the past month and about 35% over the past year, placing a spotlight on its current valuation and fundamentals.

The company closed at US$321.20 and reports annual revenue of €7,203.09 million and net income of €1,598.14 million, supported by its global luxury performance sports car business and related services.

At a share price of US$321.20, Ferrari’s 1 day share price return declined 3.31%, adding to a 30 day share price return down 13.85%. The 1 year total shareholder return fell 34.71%, while the 5 year total shareholder return remains positive at 57.44%. This indicates that recent momentum has faded compared with a still constructive longer record.

If you are weighing Ferrari’s recent pullback, it can help to widen the lens and check other opportunities that share some of its premium, high performance profile, starting with 18 top founder-led companies

With Ferrari reporting €7,203.09 million in revenue, €1,598.14 million in net income and a market value around US$57.2b, the key question is simple: after this pullback, is there a buying opportunity, or is the market already pricing in future growth?

Most Popular Narrative: 25.1% Undervalued

Ferrari's most followed narrative pegs fair value at about $428.97 versus the last close of $321.20, framing the recent pullback against a higher long term anchor.

The launch of six new models in 2025, including the anticipation of the Ferrari full electric, is likely to drive revenue growth, capturing both existing and new customers while expanding Ferrari's electrification journey.
Investment in lifestyle activities and brand enhancement, alongside new racing sponsorships, is intended to foster brand visibility and engagement, contributing to revenue growth and maintaining high profitability margins.

Curious how steady revenue growth, resilient margins and a premium earnings multiple combine into that higher fair value? The narrative leans on specific long range earnings and valuation assumptions that go well beyond headline guidance.

Result: Fair Value of $428.97 (UNDERVALUED)

However, this upbeat narrative could be challenged if the six planned 2025 launches dilute Ferrari’s exclusivity or if supply chain issues pressure margins and earnings.

Another View: Cash Flow Signals A Very Different Story

While the analyst narrative points to a fair value of $428.97 and an undervalued stock, the SWS DCF model tells the opposite story. On that math, Ferrari’s estimated future cash flow value sits at $119.63, well below the current $321.20 share price. This suggests limited margin of safety if those cash flow assumptions hold.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Ferrari for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With such mixed signals, it pays to stress test the assumptions yourself and see which story you believe is more convincing. To weigh the potential upside against the concerns already on investors’ minds, start by reviewing the 3 key rewards and 1 important warning sign.

Looking for more investment ideas?

If Ferrari has you thinking harder about price, quality and risk, do not stop here. Cast the net wider now or you could miss your next standout idea.

• Target potential mispricings with a focus on quality companies that may trade below estimated worth by checking the 51 high quality undervalued stocks.
• Strengthen your income stream by reviewing companies that combine higher yields with balance sheet resilience through the 14 dividend fortresses.
• Reduce portfolio shocks by scanning for businesses with lower risk profiles and steadier fundamentals using the 66 resilient stocks with low risk scores.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.