2 Reasons to Buy This Hidden Gem Luxury Stock
Key Points
Ferrari is often overlooked due to the nature of the auto industry -- but that's a mistake.
Ferrari's margins approach luxury territory, unlike typical automakers.
Ferrari's near-$4 million F80 model vehicle could power profits in the near term.
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Most investors wouldn't think to check the automotive industry for luxury stocks. That's because the auto industry is notorious for intense competition, low margins, and a high price of doing business in a capital-intensive industry. Ferrari (NYSE: RACE) however, is truly a hidden gem because it flips many of the automotive investing stereotypes on their head. Let's take a closer look at this unique luxury super-car maker and identify two reasons investors can buy into this winner.
Out-of-this-world margins
The first thing that potential investors should know about Ferrari is about its industry-thumping margins. Ferrari is known for keeping a lid on its sales, limiting its book orders, and notoriously selling one fewer vehicle than the market demands to drive its pricing power. Furthermore, in part because the super-car maker introduces new technology on each vehicle, developed alongside its racing team, its pricing power is sustainable. It has proven this over time.
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Data by YCharts.
As you can see in the graph above, not only do Ferrari's margins dwarf its industry competitors, they rise consistently over time, suggesting that the company has durable competitive advantages. Ferrari has the rare pricing power combined with brand power to nearly name its price on vehicles and still fill its limited order book.
One example is the company's upcoming F80. Even with its astonishing price tag of nearly $4 million, it's already sold out. Ferrari will likely continue to execute its playbook to launch innovative technology in new vehicles and continue driving margins and profits higher.
Image source: Ferrari.
The road ahead
While the world is transitioning from internal combustion engine (ICE) vehicles to electric vehicles (EVs) -- some regions, such as China, faster than others -- Ferrari has the luxury of waiting until the market is ready for its debut. But while consumers and investors alike await the company's first full-electric vehicle, what investors might not know is that Ferrari has already dipped its toe in the electric vehicle market with hybrids.
In fact, during Ferrari's 2025 third quarter, the company's shipments were split 57% for ICE and 43% for hybrid. Mainstream automotive giants in the U.S. have quickly learned that companies probably should have slowed down and taken a smaller step toward embracing hybrids before jumping to full-electric vehicles. Ford Motor Company just announced a $19.5 billion charge to pivot away from its EV strategy.
Ultimately, Ferrari is as unique a stock as it is a business. The company has durable competitive advantages that have consistently driven its operating margins higher over the past decade, along with its profits and stock price. Ferrari should continue racing ahead for investors willing to start a small position in the unique automaker and hidden gem stock.
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Daniel Miller has positions in Ford Motor Company. The Motley Fool recommends Ferrari and Stellantis. The Motley Fool has a disclosure policy.
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