Down 29% in 6 Months, Is Ferrari Stock a Buy?

Shares of Ferrari (NYSE: RACE) have hit a rough patch.

The stock is down significantly from its 52-week high and has fallen about 29% over the last six months. A drop like this is highly unusual for the iconic Italian luxury automaker, which has historically traded with the stability of a high-end collectible rather than a cyclical car company.

But the pullback arguably makes sense. Late last year, the market was spooked by management's updated five-year financial targets presented during its Capital Markets Day, which implied a significant deceleration in the company's top-line growth rate.

With that said, the underlying business is still performing exceptionally well. And with a major new supercar rollout underway, is this rare pullback a buying opportunity?

Image source: The Motley Fool.

A conservative roadmap

To understand the stock's recent weakness, look no further than the company's 2030 financial targets.

At its Capital Markets Day last October, management expects net revenue to reach approximately 9.0 billion euros by the end of the decade. Compare that to the 7.15 billion euros in revenue the company generated in 2025, and this implies a compound annual growth rate of just 5% over the next five years.

That is a noticeable step down from the double-digit growth rates investors have grown accustomed to in recent years.

But there is a good reason for this cautious approach. Ferrari's entire business model relies on scarcity. By intentionally capping volume to protect its pricing power, the company ensures its brand equity remains pristine.

And the fruits of this discipline are clearly reflected in the company's profitability. In 2025, Ferrari's operating margin -- or its operating profit as a percentage of total revenue -- expanded by 120 basis points year over year to a staggering 29.5%.

For Ferrari, margin expansion like this means earnings per share is growing faster than revenue -- a trend I think should persist for the company over the long haul.

Even more, Ferrari produced over 1.5 billion euros in industrial free cash flow last year. Compare that to the roughly 1.0 billion euros it generated in the prior year, and that represents a massive 50% year-over-year increase.

The F80 catalyst

While the five-year headline growth rate may seem uninspiring, the near-term product pipeline is packed with high-margin catalysts.

The most important of these is the newly launched F80 supercar. Deliveries of the highly anticipated hybrid flagship commenced late last year and should ramp up throughout 2026. As these ultra-expensive, multi-million-dollar vehicles roll out of Maranello and onto the income statement throughout the year, they should provide a robust tailwind to both revenue and earnings.

Capturing the unique predictability of Ferrari's business model, the company has pre-sold all of its F80 units.

In fact, the company's overall order book for its cars "extends toward the end of 2027," said Ferrari CEO Benedetto Vigna during the company's fourth-quarter earnings call.

Time to buy?

Even after the recent haircut, Ferrari stock is not cheap. As of this writing, shares trade at about 33 times earnings.

At this valuation, the market is still pricing in near-flawless execution.

Additionally, because of this rich premium and management's modest 5% annualized growth target, investors probably shouldn't expect the stock to deliver market-crushing returns from here.

Of course, that doesn't mean the stock isn't worth buying. Ferrari offers a unique combination of extreme brand loyalty, a multi-year order book, and a customer base that is highly resilient to recessions.

Further, the company is actively boosting its total shareholder yield. Earlier this year, the company said it would increase its dividend by 21%. In addition, Ferrari is executing a meaningful 3.5 billion euro share repurchase program that will run through 2030. By reducing the overall share count, this buyback should help drive earnings per share higher even if top-line growth is modest.

Returns may not be exceptional over the next five years. But I believe Ferrari offers investors a decent way to diversify a portfolio beyond traditional technology stocks.

For investors looking to secure a potentially solid long-term return and a growing stream of dividend income, I think this dip is a great place to start building a position.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ferrari. The Motley Fool has a disclosure policy.