Key insights
- The author argues that Ferrari's stock dip is an overreaction, drawing parallels to Porsche's success with SUVs. They suggest Ferrari's strategy of using sports cars to build brand image while selling high-priced, more practical vehicles to wealthy consumers is a sound business model. This contrarian view implies potential upside for Ferrari's stock.
This is a contrary opinion to a lot of the talk about Ferrari, and the 10% hit to the share price this week.
Everyone is saying that the Ferrari Luce looks awful, Enzo will be spinning in his grave etc. But, let's consider another sports car maker: Porsche.
Which car do Porsche sell more of? The 911? the beautiful sports car it is known for? No. The top sellers are the SUVs, the Macan and the Cayenne. They make up about 60% of all Porsche sales. The 911 is around 20% of sales.
In summary: people buy Porsches for the badge, mostly. They love the idea of owning a Porsche, but they want something for driving the family around. And I think the sports cars are like couture fashion. Couture houses will put on fancy shows, create exotic gowns, but the real money maker is lots of expensive accessories to people. The clothes create the image.
My feeling is that Ferrari are following the same strategy as Porsche. Have those gorgeous red sports cars to make the brand sexy, then sell $500K cars to the super rich. That's a very profitable business.
I'm not holding at the moment, but thinking of buying a little on the dip. So, any thoughts?