Ferrari's Q4 Earnings Beat Validates Model, Yet Valuation and EV Risks Persist

What happened

Ferrari reported strong Q4 2025 results with revenue up 7%, EBIT up 12%, and free cash flow surging 50% on lower volumes, underscoring the power of its premium pricing and mix strategy. This performance follows a sharp ~20% stock decline in October 2025 after conservative Capital Markets Day guidance reset long-term growth expectations and EV targets, shifting the narrative from hyper-growth to a slower compounder. The Seeking Alpha article portrays the sell-off as an overreaction to guidance rather than fundamental weakness, noting that earnings are already tracking above Ferrari's own 2026 assumptions. However, the DeepValue master report cautions that at ~32x forward EPS, the stock remains expensively valued, with future returns reliant on capital allocation and unproven EV economics. Critical analysis reveals that while operational execution is solid, investors must weigh the high multiple against persistent risks like margin dilution from electrification and potential order book softness.

Implication

The Q4 results validate Ferrari's ability to drive profitability through pricing and mix, supporting the investment thesis on brand durability and scarcity. However, the post-earnings rally may overcorrect for the guidance-driven derating, ignoring the slower long-term growth trajectory priced into the stock. With €3.5 billion in buybacks planned, returns now hinge on disciplined capital allocation and maintaining margins through the EV transition, which remains unproven. Investors should heed the DeepValue report's 'WAIT' rating, seeking entry below $310 or clearer evidence that EVs can be margin-accretive to mitigate downside risks. Upcoming catalysts like the Elettrica launch and 2026 guidance will be critical to assess whether conservative targets are floors or could face further revisions.

Thesis delta

The Q4 earnings confirm the resilience of Ferrari's business model but do not materially alter the investment thesis. The shift is minimal: increased near-term confidence in execution is offset by ongoing concerns over EV profitability and valuation, reinforcing the need for a cheaper entry or proof of margin sustainability before upgrading the call.