It’s exciting news that Ferrari (NYSE:RACE) plans to release fully electric Ferraris. However, this isn’t going to happen in 2023 or even in 2024. Furthermore, Ferrari’s financial results are impressive — but before you buy RACE stock, check the valuation and you might decide to wait a while.
Italy-based Ferrari’s vehicles are known for being luxurious, powerful, and, for many automotive shoppers, unaffordable. Yet, as we’ll discover, Ferrari’s quarterly data demonstrates that there are buyers out there even during times of high inflation.
Still, just because people are willing to pay high prices for Ferrari’s vehicles, doesn’t mean you should overpay for RACE stock. So, let’s get the lowdown on Ferrari now and then consider a strategy for patient traders.
Ferrari Prepares to Unveil an Electric Super-Car
There are a couple of compelling reasons for investors to take a strong interest in Ferrari. One of them is the company’s plans to introduce an all-electric Ferrari vehicle. Benedetto Vigna, the automaker’s CEO, told Bloomberg that Ferrari’s production site in Maranello, Italy, “will be ready in June 2024.”
That’s a year away, but don’t assume that automotive buyers will get their hands on a fully electric Ferrari vehicle next year. Vigna revealed that Ferrari will unveil its electric super-car in 2025’s fourth quarter. This timeline might disappoint Ferrari’s eager customers and investors.
Nevertheless, it will be exciting to see the final product in a couple of years. It’s also encouraging to witness Ferrari moving into the financial fast lane with outstanding first-quarter 2023 results. Ferrari demonstrated resilience despite high inflation, with 20% year-over-year net revenue growth, a 27% increase in adjusted EBITDA and a 24% improvement in adjusted net profit.
RACE Stock Should Get a Speeding Ticket
Even though Ferrari’s Q1 2023 results beat Wall Street’s estimates, and even though Ferrari’s electric super-car will probably be awe-inspiring, there’s a problem. Specifically, Ferrari appears to be over-valued.
RACE stock zoomed ahead this year, speeding from $215 in early January to around $300 recently. That acceleration seems to have stretched Ferrari’s valuation to the point where cautious investors should be concerned.
For example, Ferrari’s GAAP trailing-12-month (price-to-earnings (P/E) ratio of 50.74x is much higher than the sector media P/E ratio of 16.61x. The same could be said about Ferrari’s TTM price-to-book (P/B) ratio (17.83x versus sector median of 2.2x) and TTM price-to-sales (P/S) ratio (9.34x versus sector median of 0.81x).)
In other words, RACE stock traders have gotten ahead of themselves. Consequently, investors should stay out of the trade until there’s a pullback in the Ferrari share price.
Set Your RACE Stock Buy Price for $270
Even though Ferrari’s vehicles are lightning-fast, prospective investors need to slow down and be patient. Ferrari’s electric super-car won’t be released to the public for a while. Moreover, the company’s valuation appears to be over-stretched.
Thus, financial traders should wait until RACE stock drops to $270 before hitting the “buy” button. That way, you can still get exposure to Ferrari’s potential future growth without being a hasty price chaser.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.