r/valueinvesting
$RACE: Ferrari Luce will unlock an entirely new customer segment.
Ferrari's Luce will expand TAM by attracting new tech billionaires, trading at a discount to historical averages with strong buybacks.
- Luce is expected to attract ~50% entirely new customers, expanding the TAM to younger tech billionaires.
- Historical precedent with Purosangue shows initial backlash can lead to massive success and long waitlists.
- Valuation is attractive at ~35x earnings vs 5-year average of ~44x, supported by high single-digit growth and buybacks until 2030.
Everyone thinks the car is ugly, sure.
But I think the market is not entirely pricing how the Luce will expand their TAM to an entirely new customer base (Ferrari expects \~50% of Luce buyers to be entirely new customers). Younger and wealthy tech billionaires and entrepreneurs who never identified with a sleek Ferrari, now are potentially able to with Luce.
Looking back to 2022, The Purosangue was Ferrari's first ever SUV and everyone then called it a betrayal. But it was a highly successful product, now having a two-year waiting list. Cristiano Ronaldo and Alisson Becker own a Purosangue.
The pattern is structurally similar here, and I think the Luce would also end up being a highly successful addition for Ferrari, despite the public backlash. CEO Vigna has also claimed that order books for the Luce already extend into late 2027.
$RACE is currently trading at \~35x earnings, well below its 5-year average of \~44x. Expected to grow high single digits for '26 and '27, and they are actively buying back their shares up to 2030.
Thoughts?
My full analysis: https://economiyaki.substack.com/p/ferrari-luce-a-new-tam
Hard pass. This ugly mess will be a flop
Look I think the thesis that moving into the 4 seater market and then the SUV market and now the EV market as a way to unlock new customers and increase TAM is reasonable - but you can’t just stop there - you need the product offerings when entering these markets to align with the overall brand vision. Purists are always going to be annoyed when the status quo shifts - who cares about the purists…this is about the general population and whether this is a prancing horse and whether or not the buyers when they step out tell the entire world they are stepping out of a prancing horse…and this car just doesn’t say that - even to the trained eye this can be mistaken for a mid market Korean EV…this is not what anyone in the 500k market is looking for.
$500k for something that people will laugh at you for? No.
Ferrari just had to make it look like a supercar even if the performance wasn't there and some techbro would've bought it
You don't pony up the money for a Ferrari with that monstrosity in mind
How many high net worth individuals do you know in real life who is excited about this car? I
Totally new customer segment. Blind people with big wallets. Better comes with Level 4 ADAS
This was the premise of a CNBC short like a month ago. I have no doubt 50% of buyers will be new. But 50% of nothing ain’t a big deal
So the people who are as dull and soulless as the Luce will be able to relate to it is what you're saying? What a great marketing strategy!
This car will make tons of money, but not because people actually want it. It’s an incredibly profitable way for Ferrari to force people to buy it to get special allocations
I would say your last sentence is really all that matters - I think the Luce absolutely damages the brand…how much is something that only time will tell and these things are measured in years and decades.
The idea that you can just broad brush the entire group of people saying ‘it’s ugly’ as ‘it wasn’t built for you anyway’ is naive. Businesses with brand moats and iconic brand images have built these symbols so that when you see them everyone, regardless of feeling towards them, knows exactly what you represent and what it means to be associated with them.
Ferrari is one of the strongest brands in the world and that brand has been built up for nearly a century on a foundation of race heritage and building the most visceral driving experiences for only the most privileged. The Luce objectively spurns the first two of these (and I suspect, but cannot confirm the third as well). This hurts the brand, it may be subtle it may be minimal, but it does. Sure they probably will sell every single one they make for MSRP or higher - this is because of the overall brand strength not because the Luce itself is successful or popular.
this car reminds me of microsoft zune.
I think it was designed for top executives, board members... and to be bought as company cars (with subsidies)
Ahh kk. Was asking because some value investors I admire like/own the stock like Guy Spier and Mohnish Pabrai
The multiple is trading at a premium I agree
Wait really? Why isnt ferrari a value stock