When it comes to making high-quality vehicles, there may be no entity that does it better than Ferrari (RACE 1.14%). The company has one of the most recognizable ultraluxury brands out there, boasts Formula One driving performance and technology and Italian flare, and makes a whole bunch of dollars doing it.
And for its next magic trick, Ferrari is likely about to do what very few across the globe can: produce a profitable electric vehicle (EV). But is that enough of a reason to buy one of the most coveted stocks in the industry?
What's going on
There's an interesting narrative out there that adoption of EV-powered Ferraris could be poor so far because they're launched at higher price points to cover the large up-front research and development costs, and the company has delayed embracing full EVs thus far due to lack of demand.
But what many investors overlook is that while Ferrari may not have embraced fully electric vehicles yet, that doesn't mean its product portfolio isn't electrified. In fact, if you break shipments down during the first half of 2025, Ferrari shipped 55% internal combustion engine (ICE) vehicles and 45% hybrids -- not enough people realize how electrified the company truly is.
The thing is, Ferrari can command this high pricing as it enjoys extreme exclusivity, helped by customers who are considered collectors. While not an EV, Ferrari's upcoming F80 launch sells for nearly $4 million and is already sold out of its initial production. Ferrari's production strategy has always been for demand to exceed supply and for only collectors to have access to, or be invited to, the purchase of rarer special-edition supercar models.
Image source: Ferrari.
So yes, Ferrari can produce electrified vehicles, and already does so heavily. And it's done so successfully because of its reputation for industry-leading technology and innovation. Each model launch has unleashed a step change in design, technology, or performance, even as the company has launched 15 models per four-year period, going back to 2018.
But next year brings yet another step forward for the company as it unleashes its first full EV, the Elettrica. The model will boast in-house-developed electric motors, batteries, and inverters (among other things), and is scheduled to have its technology reveal just next month. Ferrari's inaugural EV will arrive in 2026, at the same time it begins U.S. shipments of the hybrid F80 supercar -- a vehicle that will command an absurd $3.9 million price tag. And they'll both almost certainly sell out for years.
That's right. Ferrari is on the cusp on unleashing not only its first EV, but also another vehicle that Barron's believes can drive its earnings per share 10% higher. But what else can Ferrari offer investors aside from its consistent growth? The answer is juicy margins that the rest of the automotive industry just can't replicate:
RACE Operating Margin (TTM) data by YCharts.
There are two very interesting things about the graphic above. First, it should be completely obvious how far Ferrari is above its competition when it comes to operating margins. In an industry where the best of competitors can barely reach a double-digit operating margin, Ferrari soars to one of near 30%.
The second thing that pops out from that graph is that all of its competitors have struggled mightily to maintain their margins over the past 18 months. On the flip side, Ferrari's have only moved higher, demonstrating the company's intense pricing power and operational efficiency.
What it all means
There may not be a better stock in the automotive industry than Ferrari. In fact, there may not be a better luxury stock than Ferrari -- it's that impressive.
With an average return on invested capital of 30% since its initial public offering in 2015, financials that dwarf those of its automotive peers, and a brand image any company would dream of, there may not be a better long-term buy than Ferrari.
Don't let its high valuation scare you off -- it commands that valuation for a reason. It's important to remember that diversification is key, but Ferrari can be a cornerstone of a long-term portfolio.
