The stock of Ferrari (RACE) is down 12% on July 31 after the luxury carmaker reported disappointing financial results and said it plans to cut prices in the U.S. market.
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The 12% decline is the biggest one-day drop in RACE stock since Ferrari held its initial public offering (IPO) in 2016. The fall comes after the Italian sports car company reported second-quarter earnings per share (EPS) of $2.38, which was $0.02 worse than consensus estimates of $2.40.
Revenue for the April through June quarter came in at $1.79 billion, which also fell short of forecasts of $1.82 billion. Despite the top and bottom line misses, Ferrari maintained its guidance for the remainder of this year, saying it still expects 2025 earnings to be greater than $9.75 per share versus estimates of $8.96 a share.
Slowing Growth
Maintaining its outlook did little to reassure investors concerned about slowing growth, especially after Ferrari said it plans to cut prices on its luxury vehicles in the U.S. Citigroup (C) issued a note on the earnings and said that focus has shifted to whether the Milan-based automaker can sustain its high profitability amid slowing growth in both sales volumes and pricing.
Specifically, Ferrari said it will reduce prices on some cars sold in America as it tries to bolster demand in the face of 15% tariffs imposed on European goods imported by the U.S. Despite the big pullback on July 31, RACE stock has risen 18% over the last 12 months as it outperforms its peers in the auto sector.
Is RACE Stock a Buy?
Ferrari stock has a consensus Moderate Buy rating among 13 Wall Street analysts. That rating is based on nine Buy and four Hold recommendations assigned in the last three months. The average RACE price target of $539.89 implies 21.86% upside from current levels.
