Ferrari has been one of the best performing S&P stocks this year, but the bank says it's been too much, too quick, and investors should rethink their position.
Ferrari may be one of the S&P 500’s best performing stocks this year — up 84% since January 1 — but “things have changed,” according to Morgan Stanley.
It downgraded the luxury automaker Thursday, warning that the sharp share price appreciation over the last 24 months has led to the stock being overvalued. It also said Ferrari faces looming threats from competitors like McLaren, Aston Martin, and Lamborghini.
“We believe the stock may have achieved 2 or 3 years' worth of share price appreciation in just the past few months,” writes analyst Adam Jonas. “For most of the stock's brief history since the IPO, we have been intrigued by how little attention US investors paid to the name. This has changed materially in 2017.”
Shares of Ferrari fell about 7% once markets opened Thursday morning.
Rumors swirled early last month about a potential Ferrari SUV. On an earnings call, CEO Sergio Marchionne said “it will probably happen, but Ferrari style.” When asked if it might resemble Porsche’s Cayenne, Marchionne said “Hell no … that would be obscene.”
Even if Ferrari were to put out an SUV sometime soon, Morgan Stanley says it would “move Ferrari in the direction of transportation, rather than uncompromising human driving pleasure.” Merely providing transportation is something the luxury Italian automaker has historically avoided.
Until something is concrete, Morgan Stanley is sticking with its $100 price target — 7.7% lower than where shares were trading Thursday afternoon.
“Ferrari is a strong and unique company that, in our opinion, is no longer attractively valued,” writes the bank. “Time for a pit stop.”