Tesla has unquestionably been on a tear since the beginning of 2017, up over 40%, with a market cap of $50 billion — neck-and-neck with General Motors and a few billion higher than Ford.
Over the past 12 months, Tesla shares have risen 50%. You might think performance like that would be hard to beat in the car business (even though a lot of people seem to think that Tesla is a tech stock).
But you’d be wrong.
The best-performing car company in the sector isn’t Tesla, founded in 2003. It’s Ferrari, founded in 1939.
Okay, the Ferrari we’re talking about has been a public company traded on the NYSE only since its 2015 IPO. But over the past 12 months, shares are up an astounding 92%.
Tesla is trading above $300 and Ferrari hasn’t yet crossed $100, so Ferrari shares have been far cheaper, relatively speaking, with a far better absolute gain.
Smooth power vs. volatility
And here’s the kicker. It’s a safe bet that Tesla’s stock price will be quite volatile going forward — just as it’s always been volatile in the past.
Ferrari, meanwhile, has been expanding production and sales without undermining desire for its exotic cars. Building 7,000 cars annually could soon rise to 10,000. And it has the attention of a top Wall Street analyst. Morgan Stanley’s Adam Jonas thinks the company is three years ahead of where the bank thought it would be at this time.
“[W]e look for Ferrari’s high-quality earnings to double in approximately 5 years,” he wrote in a research note published on Monday, going on to highlight Ferrari’s low debt. “At a high level, we believe FCA can double its earnings power in 5 years. We don’t cover many companies that can do this, and it is particularly notable for a company so under-levered.”
Here’s another thing. Tesla is certainly a sexy company. But Ferrari is, well … c’mon, it’s Ferrari!
In all seriousness, Ferrari’s rally looks to be based on solid fundamentals, while Tesla’s is all about buying the future. The mind-bending thing is that buying Ferrari’s future has cost relatively less — and returned more.