Ferrari Stalled on Its EV Goals, but It Still Delivers 38.8% Margins

The market has repriced Ferrari (NYSE: RACE) for slower growth, but the company's order book is still filling up through next year. That level of demand suggests the pullback was more about the stock's valuation than the health of the underlying business. For investors, that means Ferrari's uniquely profitable model is now available at a more reasonable price.

The sell-off was triggered by its capital markets day last year, where management laid out a new path to 2030. The company now targets revenue growth of just 5% per year, a significant deceleration from the 12% to 17% rates of recent years.

Ferrari also slashed its 2030 target for electric vehicle sales from 40% of the lineup to just 20%, with management stating the company "cannot commit on something we cannot achieve." The market took the sales forecast as a sign that earnings growth would slow, sending the stock to levels not seen in over a year.

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Pricing power comes standard with this model

The underlying business is not the issue. The company's entire model is built on engineered scarcity. Ferrari caps production, tells customers when they can buy a car, and rarely offers discounts. It deliberately delivers one less vehicle than the market demands to protect its pricing power and brand exclusivity.

That discipline allows the company to raise prices and sell high-margin personalization options that often boost the final price. In recent quarters, personalization has accounted for about 20% of revenue from cars and parts. The result is an automaker with profit margins most competitors can't match.

Revenue rose 7%, reaching 7.1 billion euros in 2025, while earnings before interest, taxes, depreciation, and amortization (EBITDA) margin improved by 50 basis points to 38.8%. The company is guiding for margin expansion to at least 40% by 2030. Industrial free cash flow, which excludes its financing and sponsorship divisions, rose around 50% to 1.5 billion euros last year. It also carries a modest net debt position, providing flexibility to fund electric vehicle development and capital requirements without putting pressure on the balance sheet.

A deliberate downshift

Since the reset in expectations in October, the stock has come down to Earth, from nearly 50 times forward earnings to around 31 times today. The outlook for slower top-line growth warranted concern, given the level of earnings growth needed to support that valuation.

Ferrari remains a healthy business with a unique position in its industry. The automaker makes nearly 14,000 cars a year, and each one is effectively sold before it leaves the line. Despite the reaction to its softer long-term sales guidance, demand doesn't seem to be the problem for the company.

Bryan White has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ferrari. The Motley Fool has a disclosure policy.