BROKERS’ NOTES: Buy Ferrari, sell Porsche

Buy: Ferrari

Recently, luxury sports car manufacturer Ferrari announced impressive quarterly results that surpassed analysts’ expectations, with earnings reaching $2.28 a share vs the forecast $1.89 a share. The growth was driven largely by robust demand for its latest models.

Ferrari’s uniqueness lies in its strategic control of supply; it produces only a limited number of vehicles each year. This scarcity fortifies the brand’s allure and exclusivity, creating a strong demand and high resale value for its models. The company’s rich heritage in motorsport further strengthens is desirability among collectors. This is evident in extraordinary auction results: the 1964 Ferrari 250 LM, the winner of the 1965 24-hour Le Mans, fetched an astounding $36.34m.

The market likes the Ferrari story, with the share price having revved 16.6% over six months and about 33% over a year.

Sell: Porsche

 Conversely, Porsche’s recent quarterly results reflected solid growth in a challenging economic environment for its traditional combustion engine and its electric vehicle models. Unlike Ferrari, Porsche manufactures tens of thousands of vehicles annually. However, operational hitches such as management challenges, efficiency lapses, rising costs and supply chain issues have affected its performance in recent years.

 Porsche’s larger production runs make its models more accessible to a wider market, which somewhat diminishes their exclusivity and potential for investment appreciation compared with Ferrari. Still, certain iconic models such as the 911 continue to perform well in secondary markets. But for now the preferred ride to kick up portfolio performance is the prancing horse.

Porsche’s share price has veered in the wrong direction, losing 3% over six months and almost 18% over a year. It could take a big change in gear to reverse that trend.