When Frederic Vasseur was offered the position leading a rival Formula 1 team, even representatives at Audi -- his employer at the time -- told him to take it. That's what happens when one of the most famous luxury brands on Earth comes calling. Ferrari (RACE -1.04%) isn't a company you turn down.
And it is much more than just racing. Its consumer vehicles are status symbols. They range in power from 612 to more than 1,000 horsepower and in price from about $225,000 to $2.3 million.
It's logical to think a recession in the U.S. would put the brakes on the carmaker's growth. But after some research, that idea may need to shift into reverse.
A truly global brand
One of the most obvious reasons Ferrari can stay in the fast lane even if the U.S. goes into recession is its global reach. As an Italian company, it should come as no surprise that it does the bulk of its business in Europe. That's the majority of the EMEA (Europe, Middle East, and Africa) band shown in the chart.
Data source: Ferrari.
While that does shield it some from a North American slowdown, the company's growth has been more robust outside of EMEA. But even the mediocre growth at home shows its resilience. The European economy has been sluggish for years. And Ferrari has grown sales in the region almost three times as fast as European Union (EU) GDP.
It isn't a perfect apples-to-apples comparison. But it's a good indication that the company isn't as tethered to economic output as one might think.
Almost recession-proof
During the Great Recession, global auto sales dropped about 11% from 2007 through 2009, according to the International Energy Agency (IEA). But recessions don't last forever. And Ferrari's typical waiting list of at least a year -- some custom models can take five years to deliver -- meant very few people walked away despite the gloom.
Ferrari's shipments actually grew 2% in 2008 and dropped a mere 5% in 2009. That was in the middle of one of the worst recessions on record. In an interview at the time, a company executive pointed to the investment properties of the vehicles -- older cars can sell for tens of millions of dollars -- and implying those who relied on Wall Street bonuses for luxury purchases didn't have "serious money" like its typical customers.
An electrifying future
Another potential headwind is the shift away from internal-combustion engines. After all, an estimate by S&P Global Mobility -- a division of S&P Global -- shows electric vehicles (EV) reaching 40% of all sales in the U.S. by 2030.
Ferrari isn't flat-footed. Somewhat surprisingly for a company selling 12-cylinder, 1,000-horsepower vehicles, Ferrari is embracing the trend.
In an effort to become carbon neutral by the end of the decade, Ferrari will launch its first all-electric supercar by 2025 and claims 80% of its vehicles will be electrified -- pure EV or hybrid -- by 2030.
Data source: Ferrari.
Spurring demand but never giving in
Last year, management outlined its plan to debut 15 new models over the next four years. The first will be the Purosangue later this year -- a hybrid SUV. That many options should stoke excitement among its customers, many of whom own several Ferraris. The approach -- limited releases of new models -- follows a well-worn playbook established over the past three-quarters of a century.
To that end, the company stopped taking orders for the Purosangue in November. It is sold out for the next two years.
CEO Benedetto Vigna didn't say just how many of the white-hot SUVs the company will ultimately make. But he has insisted Ferrari would "always build at least one car fewer than demand." That should keep sales and profits predictable for at least the next few years while protecting the brand.
Wall Street knows it: Shares are up 21% this year and trade at a lofty 48 times trailing-12-month earnings. That ratio seems more reasonable when considering analysts' earnings expectations of more than $8 per share in 2024 -- about 60% higher than last year.
For now, I'm staying out of the fast lane and hoping to get a better entry point to own part of this iconic company. If that opportunity ever comes, those shares are likely to be parked in my portfolio forever. Until then, my desire for the stock will remain much like my desire for the cars: unfulfilled.
