Why I Bought the Dip in Ferrari Stock

After Ferrari's (NYSE: RACE) October Capital Markets Day, the stock cracked. Shares of the Italian luxury brand have fallen from levels above $500 in early October to below $400 more recently. For a stock that isn't typically very volatile, a drop like this in Ferrari stock is rare. Investors were spooked by the company's new 2030 targets, which implied slower growth than many had anticipated.

The irony is that the sell-off came just as Ferrari raised its 2025 guidance again and reaffirmed some of the best margins in the auto industry, with high-30s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margins and high-20s adjusted operating margins.

In my view, the gap between cautious long-term targets and still-excellent near-term performance created an opening, so I bought the dip.

Of course, there's more to the bull case than this. So, here's the full story on why I think Ferrari stock is a buy today.

Weak guidance? Or is it just conservative?

At its Capital Markets Day, Ferrari laid out a 2030 plan that calls for net revenue of about 9 billion euros, up from revised 2025 guidance of at least 7.1 billion euros. That works out to roughly 5% annualized revenue growth. In addition, the luxury automaker said it expects earnings before interest (EBIT) to climb to at least 2.75 billion euros by 2030, implying around 6% annual growth and an EBIT margin of at least 30%.

Those figures are below what many investors hoped to see, especially after a stretch of double-digit earnings growth.

But management also paired this slower headline growth with plans for at least 3.6 billion euros of EBITDA and about 8 billion euros of industrial free cash flow across the plan's period: 2026 to 2030. And it committed to returning roughly 7 billion euros to shareholders over that period, split between dividends and buybacks.

Additionally, there are several reasons to believe Ferrari is being ultra conservative here.

First, Ferrari has a habit of outperforming its targets. The company is on track to exceed many of its 2026 profitability targets from its previous multiyear plan (laid out in 2022 for the period covering 2023 to 2026) a year early.

Another important detail is timing. This plan extends for five years this time. The company's last Capital Markets Day plan spanned a four-year period. Setting financial targets so far out makes conservatism prudent -- and management likely considered this when it committed to a five-year plan.

Finally, there's a key phrase associated with some of its 2030 financial targets: "at least." For instance, Ferrari expects to achieve a 2030 adjusted EBITDA margin of "at least" 40%.

So, is management's guidance disappointing or just cautious? I think the latter. When a management team with Ferrari's track record chooses conservative growth assumptions, I tend to treat them as a floor rather than the target.

2026: The year of the F80 supercar

The headline numbers at Capital Markets Day also mask the contribution of individual products. Ferrari's recently unveiled F80 supercar is a good example. The car will be limited to 799 units, sits at the very top of the range in terms of performance, and carries a base price around 3.6 million euros. All units are already spoken for.

From an investor's perspective, a sold-out, ultra-high-margin supercar program is powerful. While the company hasn't laid out its 2026 guidance yet, my guess is the ramp-up of F80 deliveries next year will help the company easily post growth in excess of its 5% average annualized revenue target -- and earnings growth could stretch into the double digits.

Scarcity is key

The other piece of the October story that weighed on the stock was Ferrari's decision to halve its 2030 electric-vehicle target from 40% of the lineup to 20%, maintaining a roughly even split between internal-combustion and hybrid cars. Some investors may have seen this as a retreat. But I see it as a recommitment to the core idea that Ferrari's job is not to chase volume or technology headlines; it is to build a few intensely desired cars that stay desirable for decades.

Ferrari is proving it will make difficult decisions to protect the brand. You can see that philosophy in the numbers. Ferrari shipped 13,752 cars in 2024, up less than 1% year over year, and Q3 2025 shipments barely budged, growing less than 1%.

The 2030 plan makes it explicit that revenue growth will be driven primarily by mix, pricing, and brand activities, with volume contributing to "a lesser extent" than these other factors. Indeed, management indicated that average volume on a per-model basis may actually decrease, as the company is introducing more models, but isn't boosting volume much.

For long-term shareholders, this slow volume growth approach is critical to managing a luxury brand. Modest physical growth keeps waiting lists long and residual values strong. Over time, that approach will likely deepen customer goodwill as management protects the brand, ultimately enhancing pricing power.

Why I was willing to pay up

Even after the drop, Ferrari stock is not cheap. The stock trades around 38 times earnings.

But I believe the October guidance reset did not break that story; it simply reset growth expectations to a level that looks more realistic -- and probably more beatable. In addition, there aren't many truly durable and iconic brands available in the public markets. Ferrari is one of them, making it worthy of an extraordinary valuation multiple for its staying power alone.

So, yes, I bought the dip. Sure, given the stock's premium valuation, there's downside risk if Ferrari doesn't deliver results ahead of its five-year plan. But I believe Ferrari's targets will prove to be conservative, making this a rare opportunity to buy Ferrari at an attractive price.

Daniel Sparks and his clients have positions in Ferrari. The Motley Fool recommends Ferrari. The Motley Fool has a disclosure policy.