The new year hasn't been kind to Tesla (TSLA -1.11%) and its shareholders. The electric vehicle (EV) maker reported disappointing fourth-quarter financial results in January. And as of March 1, shares are down 18% in 2024.

Tesla is dealing with softer demand trends, as well as worsening profitability. The EV stock currently sits at 50% off its all-time high, prompting some opportunistic investors to want to buy the dip.

But before doing so, it's best to consider another automotive stock instead.

Not a typical car company

Investors are certainly familiar with Ferrari (RACE 2.49%). The luxury automaker designs and produces some of the most expensive cars in the world, heavily influenced by the company's long racing heritage. It's not out of the ordinary for a new model to set you back upwards of $400,000, with exclusive and limited-edition models in the seven-figure range.

There aren't many people who can afford these things. As a result, Ferrari doesn't make and sell that many. It has 13,663 units going to customers in 2023. That figure seems alarmingly low at first glance.

But to be clear, this has nothing to do with there being a shortage of demand. The executive team intentionally keeps volumes low in order to support the company's status as a true luxury brand. It's no wonder that Ferrari's gross margin in the last five years has averaged an excellent 50.5%. There's a lot of pricing power in exclusivity.

Last year, the business saw its revenue and adjusted earnings per share increase 17.2% and 35.6%, respectively. Steady top- and bottom-line gains are a usual occurrence.

Even more impressively, investors can expect solid financial results no matter what the macroeconomic picture looks like. Because Ferrari targets the super-wealthy as its clients, a recessionary scenario has minimal negative effects on the company. When times get tough, these select people still have the financial horsepower to shell out hundreds of thousands of dollars for new cars that they view as collectors' items.

Hitting a speedbump

In the last decade, you'd have struggled to find a better-performing stock than Tesla. Shares of the EV maker have skyrocketed 1,140% since early 2014. This is only possible because the company was able to disrupt an outdated industry with its focus on innovation, technology, and outstanding manufacturing capabilities.

However, for all that it's accomplished thus far, Tesla can't escape the challenges it's currently facing. Higher interest rates and intense competition forced the executive team to slash prices on its models numerous times. This resulted in shrinking margins.

Making matters worse, revenue was up by just 3% in Q4, a far cry from the extraordinary growth that was being registered even just two quarters ago. Recent trends have highlighted how sensitive Tesla is to macro factors, something Ferrari really doesn't have to worry about.

Valuation matters immensely

Ferrari shares have soared 232% in the last five years, and they continue hitting fresh all-time highs. They're up 26% through the first two months of 2024.

I don't think the stock flies under the radar anymore. The market is fully aware that this is truly an exceptional business.

This couldn't be more obvious if we took a look at the valuation. Ferrari trades at a forward price-to-earnings (P/E) ratio of 51.4. That's expensive without question -- and I believe it fully prices in investors' positive perception of the company's pricing power, growth potential, and profitability. But Ferrari is still cheaper than Tesla, which sells for a forward P/E multiple of 63.4.

Investors who care more about value might not think that Ferrari is a smart buy. But if you're someone who cares first and foremost about owning one of the absolute best businesses out there, then the valuation might not discourage you one bit from buying the stock.