Please ensure Javascript is enabled for purposes of website accessibility

Why Ferrari Stock Is Hitting the Brakes Today

By John Rosevear - May 4, 2021 at 11:25AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Good earnings were overshadowed by some disappointing guidance.

What happened

Shares of Italian supercar-maker Ferrari (RACE -0.09%) were trading lower on Tuesday after the company reported its first-quarter earnings. Although the results were quite good, Ferrari said that the profit-growth targets it had expected to hit next year won't be hit until 2023.

As of 10:45 a.m. EDT, Ferrari's shares were down about 6.8% from Monday's closing price.

So what

Ferrari's first-quarter report was a good one. Operating profit rose 21% on strong demand for its newest V-8 sports car, while higher-end models helped push its operating margin to a very stout 26.3%, 2.7 percentage points higher than a year ago.

Ferrari also said that its order book is at a record level, and it now expects its full-year 2021 results to land at the high end of the upbeat guidance ranges it provided in February.

A Ferrari 812 GTS, a two-seat V-12-powered luxury sports car with a retractable roof.

Good sales of Ferrari's new 812 GTS, a targa-top version of its popular 812 Superfast, helped boost margins in the first quarter. Image source: Ferrari.

So why was the stock down? Because it won't hit an ambitious goal that it set in 2018 until 2023, a year later than planned.

Ferrari told auto investors in 2018 that it expected its profit to roughly double by 2022, with expanded profit margins driven by a range of new models (including the company's first-ever SUV). But it said on Tuesday morning that, because of cost cuts related to the COVID-19 pandemic, it's now pushing those goals off a year, to 2023.

That's why the stock is down today.

Now what

Ferrari's home base is the city of Maranello in the region of northern Italy, which was hit especially hard by the initial outbreak of COVID-19 in Europe last year. Despite a hefty backlog of orders, Ferrari was forced to idle its two factories for several weeks. In response, it ratcheted down some of its future-product spending to ensure that it could get through the disruption without cutting employees. 

The gist of what it said on Tuesday is that those cuts have led to delays in some of its upcoming products. That, in turn, led it to push off its ambitious profit goals until 2023.

But that said, all signs are that Ferrari's business is still on the right track, even if the profit train is running a bit behind schedule. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ferrari N.V. Stock Quote
Ferrari N.V.
RACE
$189.81 (-0.09%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
323%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.