Morgan Stanley Backs Ferrari Amid EV Design Backlash

Ferrari's recently revealed EV, the Luce, has ignited controversy among enthusiasts due to its divisive aesthetic. This criticism has impacted investor sentiment, with Ferrari's stock experiencing a decline over the past year. Morgan Stanley, however, has issued a positive outlook, upgrading the stock and increasing its price target. The bank argues that the stock's drop is largely due to market re-rating rather than fundamental earnings issues, as earnings revisions have been minimal.

Despite the debate surrounding the Luce's design, Ferrari's core business remains strong. The company consistently achieves profit margins near 40%, a benchmark in the industry. Furthermore, excitement around new models, such as a special-edition 12Cilindri with a manual transmission, continues to drive demand among Ferrari buyers. Morgan Stanley acknowledges concerns like capital markets day targets and resale values of hybrid models but believes these are being overstated as terminal brand risks.

Dealer checks in key markets like the US and Europe do not indicate any damage to the Ferrari brand. Instead, the situation is described as a "temporary product-cycle mismatch." Demand remains particularly strong for Ferrari's highly exclusive special series cars, limited allocations, and future collectible models. Morgan Stanley also frames Ferrari's deliberate volume growth slowdown as a strategy that enhances pricing power, allocation discipline, and the perception of exclusivity.