Is Ferrari Set for a Comeback After Recent 19% Share Price Drop?

Thinking about what to do with Ferrari stock right now? You are not alone. The iconic Italian automaker has had a bumpy ride recently, sliding nearly 19% in just the past week and more than 15% over the last 30 days. Even year-to-date, Ferrari is down a modest 2.2%, and over the last 12 months it has slipped 9.4%. However, if you step back a bit further, the outlook quickly shifts. Shares are up a remarkable 126.8% over three years and an equally impressive 124.3% over five years. Such mixed returns have investors wondering whether the racing legend’s stock is about to make a comeback, or if risks now outweigh the horsepower.

Part of the recent turbulence comes as the market reassesses luxury and high-end consumer brands. Though broader market trends have affected sentiment, some investors are starting to question whether Ferrari’s premium can be justified at current valuations, especially after such a long run-up. According to a recent valuation assessment, Ferrari scores just 1 out of 6 on our undervaluation checklist, suggesting it may be pricey by conventional metrics right now.

Of course, valuation is far more than a number or two, and no single method tells the whole story. Let’s unpack how Ferrari stacks up across common valuation models. Later, I will share an often-overlooked approach to assessing true value in stocks like this.

Ferrari scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Ferrari Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s fair value by projecting its future cash flows and discounting them back to today’s value. This approach aims to capture the real earning power of a business, focusing on how much cash Ferrari can generate in the years ahead.

For Ferrari, the latest twelve months’ Free Cash Flow sits at approximately €1.3 billion. Looking out over the next five years, analysts forecast its annual Free Cash Flow will steadily rise, with projections for 2029 reaching €1.8 billion. Beyond that, longer-term estimates are extrapolated based on modest growth rates. These significant cash flows highlight Ferrari’s robust business even in a challenging market.

However, when all forecasted and estimated future cash flows are discounted back, the DCF model arrives at an intrinsic value of €85.44 per share. By comparison, Ferrari’s current share price trades nearly 377% above this estimated fair value. This suggests a substantial disconnect between expected future cash flows and what the market is willing to pay right now.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Ferrari.

Our Discounted Cash Flow (DCF) analysis suggests Ferrari may be overvalued by 376.8%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Ferrari Price vs Earnings

For established, profitable companies like Ferrari, the Price-to-Earnings (PE) ratio is a well-recognized yardstick. It demonstrates how much investors are willing to pay for a euro of earnings, serving as a quick way to gauge whether a stock trades at a premium or discount. Higher growth prospects and lower perceived risk can justify elevated PE ratios, while slower growth or heightened risk typically call for lower multiples.

Ferrari is currently trading at a PE ratio of 39.5x. This stands in sharp contrast to the average for its industry at 18.8x and the average across similar peers at 16.1x. Clearly, the market is attaching a significant premium to Ferrari, likely reflecting its luxury brand edge and consistently strong margins.

However, comparing a company solely to its peers can miss important nuances. That is where Simply Wall St’s "Fair Ratio" comes in. This proprietary calculation suggests the PE ratio the market should reasonably pay, factoring in Ferrari’s unique mix of earnings growth, risk, profit margins, industry context, and market cap. In Ferrari’s case, the Fair Ratio is 15.0x, which is well below its current multiple and closer to the broad industry and peer benchmarks.

Since Ferrari’s actual PE sits notably higher than its Fair Ratio, the evidence suggests the stock is currently overvalued when viewed through the lens of its earnings power and fundamentals.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Ferrari Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your own story about a company that links your perspective on Ferrari’s future (like what you think will drive revenue and earnings) directly to the numbers and forecasts you prefer, tying everything together into an estimated fair value.

Instead of relying solely on traditional models, Narratives allow you to combine your personal outlook on Ferrari’s electrification plans, new model launches, or brand strategy with financial forecasts, making your investment thesis much more transparent and actionable. On Simply Wall St’s Community page, a feature used by millions of investors, you can easily explore, create, and update Narratives to reflect your view of Ferrari and see how your conclusions align with or differ from others.

Narratives help you decide when to buy or sell by directly comparing your own fair value estimate against the latest share price, so your decisions are driven by your unique expectations and not just consensus. These stories are kept current as new earnings or news rolls in, meaning your valuation and thesis evolve as the facts change.

For example, some investors believe Ferrari could be worth as much as $597.04 if electrification and brand momentum exceed expectations, while others see only $397.31 if growth disappoints. Narratives make these perspectives visible, grounded, and actionable.

Do you think there's more to the story for Ferrari? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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