Tesla (NASDAQ: TSLA) shareholders have struggled this year. January saw poor fourth-quarter financial figures from the EV producer. Shares are down 18% in 2024 as of March 1. Tesla faces declining demand and profitability. Some investors want to buy the EV stock's 50% drop from its all-time high.
Ferrari is well-known to investors. Due to its racing history, the premium carmaker creates some of the most costly automobiles in the world. With rare and limited-edition models costing seven figures, new models can cost over $400,000.
Few can afford these. Due to this, Ferrari produces and sells few. Customers will receive 13,663 units in 2023. That number seemed alarmingly low.
This is not due to a demand shortfall. The leadership team keeps quantities low to maintain the company's luxury brand status. Ferrari's exceptional 50.5% gross margin over the past five years is no surprise. Pricing power is high in exclusivity. Revenue and adjusted earnings per share rose 17.2% and 35.6% last year. Continuous top- and bottom-line growth is common.
Even better, investors can expect strong financial results regardless of macroeconomic conditions. Ferrari suffers little from recessions because it targets the ultra-wealthy. Some people can afford hundreds of thousands of dollars for new cars they consider collectors' goods even in hard times.
Tesla outperformed most stocks in the last decade. Shares of the EV producer have risen 1,140% since early 2014. Only creativity, technology, and excellent production allowed the company to disrupt an antiquated sector.
Despite its successes, Tesla can't escape its current problems. Higher loan rates and fierce competition drove the management team to repeatedly lower model prices. This reduced margins. Even worse, Q4 sales was up only 3%, far from the remarkable gain seen two quarters before. Tesla's recent patterns show its macrosensitivity, something Ferrari doesn't have to worry about.
Ferrari shares have risen 232% in five years and continue to achieve record highs. They're up 26% in 2024's first two months. I think the stock is no longer hidden. The market knows this is a special company.
This is clear from the valuation. Ferrari has a 51.4 ahead P/E. That's pricey, but I think it completely reflects investors' optimism about the company's pricing power, growth, and profitability. Ferrari costs less than Tesla, which has a 63.4 ahead P/E multiple. Ferrari may not appeal to value-oriented investors. If you care most about owning one of the top companies, the valuation may not deter you from buying the shares.
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