Longtime Tesla bull Morgan Stanley just named Ferrari a new leading automotive stock, saying its “unrivaled brand” makes it best able to handle macroeconomic uncertainty.

  • On Monday, Ferrari replaced Tesla as Morgan Stanley’s top carmaker favorite.
  • Ferrari investors are underestimating the luxury car maker’s electric vehicle capabilities.
  • Morgan Stanley sees upside potential for Ferrari stock by 14%, raising its price target to $310 per share.

Morgan Stanley removed Tesla from the top spot among car companies in favor of Ferrari, saying the luxury car company’s appeal lies in its predictable business model and unrivaled brand.

“We see Ferrari as the most protective name in our review, avoiding much of the EV hype and risk associated with EVs. Attractive risk/reward,” equity analyst Adam Jonas wrote in a note to the bank on Monday.

The investment bank raised its price target for NYSE-listed Ferrari shares to $310 per share from $280. The move in the overrated stock meant a 14% price increase from Friday’s close at $271.45.

Ferrari shares rose 0.3% in the afternoon session on Monday, trading above $271 a share. Tesla, whose shares have jumped about 58% this year, fell about 1.5% earlier in the week.

“Ferrari isn’t cheap, but that’s the price to pay for safety,” Morgan Stanley said.

The bank said that Ferrari’s electric vehicle capabilities are underestimated.

“By building on our knowledge of hybrids and applying our racing DNA, we believe that Ferrari can offer an electric car that will be just as desirable as what investors are used to. [an internal combustion engine]Jonas said.

Morgan Stanley said that given its relatively bearish view of auto industry fundamentals, Ferrari has a “highly predictable business model” as well as good revenue visibility.

It also has the highest pricing of any of the companies covered by it and “an almost unrivaled brand and market moat”.

“In our view, buying a Ferrari today is not so much about ‘engine sound’ or ‘performance’ per se. Rather, we think it’s a combination of factors that drive customers to want the elements that Ferrari has: rarity, desirability, connotations of luxury and performance (stemming from F1 racing pedigree), and exquisite Italian design and engineering.”

The Ferrari brand and its scarcity are driving unprecedented demand for its cars, and the luxury car maker can capitalize on this with tight supply controls.

“That makes Ferrari the most recession-resistant and predictable car company in our review,” Jonas said.

The bank has a price target for Tesla of $220. The stock traded around $195 on Monday.

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