Morgan Korn(NEW YORK) — Want a Ferrari but can’t afford a car? There’s another way to own a piece of the legendary Italian marque.
A Ferrari fan could spend $215,000 on the Portofino, the company’s newest convertible sports car and entry level model, or buy 1,335 shares of the company, which was recently trading at $162 on the New York Stock Exchange (ticker symbol RACE).
An ultra-rare and exclusive Ferrari, like the iconic 250 GTO from the 1960s, commands millions and millions of dollars. Take the car or 267,000 shares?
One obvious downside to owning Ferrari stock: not being able to drive your investment. There’s the adrenaline rush when mashing the throttle, the raw thrill of hearing the engine scream and the soundtrack of nirvanic burbles and growls emanating from the exhaust pipes.
Ferrari stock, however, is even hotter than the cars. Shares have spiked more than 65 percent since the start of the year. For investors who bought stock at Ferrari’s IPO in October 2015, the return has exceeded 221 percent.
So what’s worth more over time: A Ferrari car or stock?
It depends on which Ferrari you buy. The current crop of production cars — the Portofino, Lusso, 812 Superfast, 488 Spider — will not be worth much in the coming years.
“I would not buy a new Ferrari as an investment,” Eric Minoff, a specialist in the motoring department at Bonhams auction house, told ABC News. “Barring inflation, the selling price won’t exceed what the cars sold for new.”
Instead, the real money can be made with Ferraris that have a racing heritage. Bonhams sold a 1962 Ferrari 250 GTO in 2014 for $38.1 million, which set a new world auction record at the time. That was broken four years later, when RM Sotheby’s found a buyer willing to drop $48.4 million for one. A third 250 GTO exchanged hands for $70 million in a private sale.
“The 1960s are seen as the halcyon era of motorsports,” Minoff explained. “Ferrari made only 36 GTOs. The most valuable Ferraris will always be the racing versions from the 1960s. Ferraris with two seats, no windows and no top are also more valuable.”
Like the stock market, classic car investing has its ups and downs. The cars that will hold their value over time are vintage, limited edition ones that were produced in very small quantities. Competition among investors heats up when exceptional cars like the GTO find their way to auction.
“People will always pay more for what they can’t have,” said Minoff. “Over the last 20 years only three to four 250 GTOs have been offered. On the whole they will always be worth a lot of money.”
Dietrich Hatlapa, founder of the Historic Automobile Group International (HAGI), an investment research company that focuses on the rare classic motorcar sector, said a car’s racing pedigree is one of the biggest drivers in value. HAGI launched four indices in 2008 to track the performance of historical vehicles.
The HAGI Top Index, which includes 50 models from 19 brands, is down 5.4 percent year-to-date but overall has an annualized rate of return of 13 percent in 38 years. HAGI’s Ferrari Index by comparison has fallen nearly 7 percent in the same time frame but had seen double-digit growth rates until 2016. Its annualized rate of return is 14.8 percent since launching 38 years ago.
Low interest rates have forced smart money to park cash in assets with greater return potential, Hatlapa told ABC News.
Even though the current market for classic car investing may be down from its peak in 2013, there’s another reason ultra-wealthy investors are committing serious amounts of cash for vintage Ferraris.
“It’s not always about the financial return,” Hatlapa said. “There’s a pride of ownership. Wanting to be seen. Financials are not a reason people buy these cars.”
Dietrich agreed that Ferrari’s mass production vehicles will be money losers over the long term, especially ones with high mileage.
“The best way to preserve value is not to drive them,” he explained. “People buy two of the same car. One for driving, one for putting away.”
Stephen Reitman, an analyst with Societe Generale, said there’s evidence Ferraris have become more attainable than they were in the past, especially in regards to the newer models.
“There is a misconception about Ferrari that it makes Veblen goods,” he told ABC News, referring to the economic theory that demand for a product rises as the price increases and that expensive goods are inherently higher quality.
“There is a certain demand for a Ferrari but it’s not unlimited,” he added.
Ferrari, unlike its competitor Porsche, has a problem selling cars in China, the world’s largest automotive market. Just 8 percent of the 9,251 Ferraris delivered worldwide in 2018 went to China. The largest market for Ferrari is Europe, where 45.7 percent of cars were delivered in 2018. The Americas accounted for 32.4 percent of Ferrari sales versus 7 percent for China last year.
The wealthy Chinese do not drive sports cars and prefer to be chauffeured, Reitman noted. The anti-corruption push by the current government has also led to unwanted attention on supercar owners.
Reitman, who has a neutral rating on Ferrari stock and a 12-month price target of $118, said he’s confident in the company’s new CEO Louis Camilleri. Previous management pushed volume of lower-priced series cars at any cost while Camilleri has put an emphasis on higher-end models like the upcoming mid-engined SF90 Stradale plug-in hybrid supercar, which is expected to be priced around 400,000 euros ($456,000).
“The Portofino is the best-selling Ferrari now in terms of volume,” he said. “The SF90 is a clear indication to push the brand away from trying to recruit entry-level buyers, a sector where there is a lot of competition. New management has taken a smarter approach to realizing the potential of the business.”
Not every Ferrari, despite the prancing horse logo, is a long-term price appreciator, he pointed out.
“Some Ferraris from the 1990s can be bought now for less than the selling price,” he said.
As for the limited edition cars like the Monza SP1 and SP2, of which only 499 will be made, Reitman recalled longtime Ferrari owners “chomping at the bit” when the cars were unveiled last fall at a private event in Maranello, Italy.
“Being told that they had to choose and could only buy one of them made [the owners] want to get both even more,” he said.
John Murphy, an analyst at Bank of America Merrill Lynch, is bullish on Ferrari stock with a buy rating and a $150 price target. He said the Icona series cars (the Monza SP1 and SP2), as well as the other 15 all-new or redesigned models that Ferrari announced as part of its 2018-2022 business plan, will help broaden the product lineup and boost revenue.
“All the cars Ferrari makes — the mass market ones and limited editions — are very important to the company,” he told ABC News. “Ferrari is so tight with its customer base. Management listens to its customers and builds what they want.”
Murphy applauded Ferrari for delaying the release of its upcoming Purosangue, a crossover-like vehicle that’s on track to be unveiled in 2022.
The company, under Camilleri’s director, has chosen to focus on more classic Ferrari cars and designs, he noted, a strategy that will benefit the company in the coming years. Unlike competitors who “rushed” their sport-utility vehicles, the Purosangue will be a small part of the product portfolio, he said.
He expects both Ferrari investors and owners to see good returns.
“Overall, the stock will continue to work and do fairly well over the long term,” he said. “The cars are worth the money. The pure driving experience is unparalleled to almost any other experience in life.”
Morningstar analyst Richard Hilgert, who has a one star rating on Ferrari, said shares are trading at a steep premium to his fair value estimate of 70 euros (about $80).
“We view this stock as too overpriced relative to our forecast for the automaker’s healthy cash flow generation and superior returns on invested capital,” he told ABC News.
As for an SUV, he said the company was right to hold off on production and think carefully about the decision, as to not offend Ferrari loyalists. He would like to see Ferrari adapt to the times and changing regulatory environment by pursuing electric sports cars. Moreover, the new CEO, despite being a “Ferrarista,” has never run a luxury goods company prior to Ferrari, he said.
What Ferrari really needs to focus on in the coming years is maintaining brand exclusivity and producing vehicles that its high-net-worth clientele feel they “have to own,” Hilgert said.
RM Sotheby’s, which sold a Ferrari 250 GT for a record $48.4 million last year, will auction 25 to 30 vintage Ferraris in August.
Barney Ruprecht, a car specialist at RM Sotheby’s, said he still expects the 250 GTO to rise in value but “incrementally and not at the same aggressive velocity that we’ve seen.”
“It’s the most valuable car in the world,” he told ABC News. “The GTO is the pinnacle of the Ferrari world. Ferraris are the most important cars we sell.”
Cars generally do not make a good investment, he acknowledged. Yet the car collector market, which he says will grow as more men in their 20s, 30s and 40s become interested in vintage cars, is based on passion.
Just don’t confuse the newer, mass production Ferraris for collectables. They’ll never be in the same league as the 250 GTO, 250 Testa Rossa, La Ferrari or Ferrari Enzo, he said.
Minoff said for those without a pile of cash to spend on a “blue chip” Ferrari or modern car like the Portofino, the Ferrari Mondial, which was produced from the mid-1980s through the 1990s, could satisfy that desire.
“You can still enter the pantheon of Ferrari ownership at the price of a used Honda Accord,” he said. “But maintenance will still be very high.”
Unlike the stock, which is open to all investors, Ferrari brass weed out potential customers and make owners jump through hoops to get a car, said Ruprecht.
Added Minoff: “Ferrari has more people wanting them than cars to sell. That cost is exclusivity.”
Copyright © 2019, ABC Radio. All rights reserved.