Ferrari NV (NYSE: RACE), manufacturer of the leading luxury sports car embraced by many wealthy car enthusiasts, had its scariest ride ever on Wall Street last week, when its stock value had the single largest daily drop in the company’s history. In just one day, the value of RACE shares closed down by 15%. Does this mean trouble for the Luxury market?
Read more on what this means for Ferrari and the greater luxury market…
All the business media has been abuzz – talking about the horrific crash in the value of the stock in Ferrari last week, one of the luxury market’s most successful brands. It was the largest single-day drop in value in the company’s history. In fact, it was so shocking that the collapse triggered the New York Stock Exchange’s “circuit breakers,” and trading in the stock was halted temporarily.
What happened? As is the company’s practice, it released new multi-year, forward-looking forecasts. Most companies typically forecast financial results for one full four-quarter fiscal year. But Ferrari has always offered this more long-term perspective to investors. The company’s forecast provided for increased revenues and earnings. That’s good…right? Well…
Company Guidance for Future Revenues & Earnings Results Was Below Market Expectations
Ferrari forecast revenues out to 2030, lifting its expected revenues to $10.4 billion. The problem is…analysts had projected Ferrari revenues would come in at $11.3 billion, nearly $1 billion higher than the company announced.
Not only that, but the company told investors that earnings are expected to grow around 6% per year through 2030. However, when they previously issued their multi-year forward guidance for 2022 through 2026, they had projected a 10% annual growth in earnings. That is another important miss, and investors began to get the feeling that the company expects business growth to slow appreciably going forward.
Ferrari Stock Value Plunges 15% in One Day; Turns Last 12 Months Negative as Well
That was enough to cause the value in RACE shares to plunge 15% the day the guidance was released. That’s not only a bad day for investors, but that significant a drop in share value also tanks the investors’ return on Ferrari stock for the last 12 months, as well.
But…it gets worse! This disturbing investor news hit during what was supposed to be a partial coming-out party for the company’s first-ever electric vehicle, the Elettrica. The Elettrica has generated quite a bit of buzz as the company hired former Apple designer Jony Ive to assist Ferrari designers in creating something really unique. For now, the company has revealed some of its proprietary technologies invented for its first electric vehicle, but not the body design. However, to investors, this news coming at the same time as the financial projection miss made the Elettrica technology launch much less exciting.
What Does All This Mean for the Broader Luxury Segment?
So what does this all mean for the Luxury segment – a segment near and dear to the hearts of many custom integrators who serve the upper 1% millionaire/billionaire class? Well, it certainly was not a positive indicator of confidence in economic growth by Ferrari, which for years has been one of the top-performing luxury sports car brands.
However, yesterday, another house of luxury, LVMH, a large global conglomerate of top luxury brands – such as Louis Vuitton, Moet, Tiffany & Co., Hennessy, and more – announced that after a couple of disappointing quarters, it experienced growth in its third quarter Fiscal 2025 results. It wasn’t much growth…just 1% organic growth in revenues Y-o-Y, but it was the first quarter this fiscal year that it showed any growth.
Luxury Channel Remains Choppy
Investors were so excited that shares in LVMH jumped 12% on the Paris exchange yesterday, the day it announced its results. So it looks like the luxury channel is still a little choppy, subject to challenging economic, international trade/tariff, and political wind changes.
Learn more about Ferrari by visiting ferrari.com.
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