When you think of the next big electric vehicle (EV) stock, you might think of those vying to be the next Tesla, such as Rivian Automotive. Or you might try your luck with a next-generation battery developer, QuantumScape. Or you might stick with the mainstream autos you know and mostly love, Ford Motor Company and General Motors.
But you likely wouldn't have thought of Ferrari (RACE 0.56%), which actually sold more hybrids in the third quarter of 2024 than it did vehicles with internal combustion engines. Here's what makes Ferrari one of the best stocks to own right as it's about to kick off its EV strategy.
What have you done for me lately?
When you think of Ferrari, you probably don't think of an EV maker. In fairness, Ferrari is probably the last automaker that needs to transition to EVs, as its gasoline models will still sell to eager collectors and consumers. It might surprise you, however, that during the third quarter of 2024, 55% of Ferrari's shipments were hybrids, with internal combustion engine (ICE) vehicles making up the other 45%.
And while Ferrari could hang its hat on selling ICE vehicles, the company is joining competitors around the world and plans to unveil its first full EV in 2025, with production beginning sometime next year. The kicker with Ferrari is that it will likely do instantly what many EV companies wish they could achieve: Earn a profit.
Thanks to Ferrari's exclusivity (the company essentially only sells a limited number of vehicles) and brand image, the company will be able to charge a hefty price for its first full EV. While the price is currently unofficial, speculation is that the new model could be priced at around $500,000. And make no mistake, Ferrari would instantly sell out of whatever number it allows to be ordered.
Ferrari's pricing power is second to none and is part of the reason the supercar maker can roll out a near $4 million vehicle, the F80. The F80 is a masterpiece with an engine crafted from Formula One technology and has already sold its order book for next year. Anthony Dick, who covers the auto sector for the Paris-based private bank ODDO BHF, told Barron's that the F80 could account for only 2% of shipments but 20% of total profit. Ferrari's top and bottom lines can be positively impacted by popular vehicles.
What makes Ferrari one of the best stocks to own, however, goes deeper than the company's flashy supercar design. Thanks in part to Ferrari's pricing power, the company maintains incredible margins compared to competitors.
RACE Operating Margin (Annual) data by YCharts
Another bonus that comes with owning shares of Ferrari is that the stock is recession resilient. The simple truth is that Ferrari's target audience is simply not impacted by economic downturns the way mainstream consumers are. For that reason, Ferrari's deliveries would likely remain strong even if the global economy hits a speed bump.
What it all means
When considering investments in the EV industry, few investors would name Ferrari off the top of their head. But those investors are overlooking an opportunity with an ultra-luxury automaker that has over half of its sales in hybrids and soon to be full EVs. Ferrari has technology that trickles down from Formula One, racing heritage few can match, an iconic brand image, and pricing power the biggest consumer goods companies dream of.
Ferrari might not be the top EV stock you think of, but maybe it should be.
