The Ferrari SP38 as seen at the 2022 Goodwood Festival of Speed on June 23rd in Chichester, England.
Martin Lucy | Getty Images
This year wasn’t about which automaker’s stock performs best. It was about which stock managed to escape the worst selling pressure of the year.
After significant growth in auto stocks in 2021, this year proved disheartening as the EV startup bubble burst, vehicle inventories were low and interest rates rose. In addition, there were fears of a recession and the general “annihilation of demand” for the sales in the industry.
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Many of the world’s biggest automakers have done well financially this year, but it hasn’t been enough to offset outside economic concerns that their most profitable days may be behind them.
“We’re bracing for a challenging FY23 outlook for auto earnings amid falling demand (higher interest rates), deflation (lower price/mix) and unfavorable shifts in EV supply/demand balances,” wrote Morgan analyst Adam Jonas Stanley, in an investor statement earlier this month.
The FactSet Automotive Index, which includes automakers and aftermarket parts, is down about 38% this year through Tuesday’s close. All major automakers and EV startups have seen double-digit declines this year — partially or fully offsetting their gains in 2021.
Many once-promising EV startups have been among the biggest losers, as some ran into capital problems or were unable to scale production as quickly as expected. Rivian, Clear, canoe and Nicola 76% experienced declines or more year to date.
Traditional automakers have been able to cushion their share declines better than EV startups. But America’s biggest automaker – General Motors and Ford engine – both experienced declines of more than 40%, apart from a surprise rally towards the end of the year. Others such as Stellar, Nissan, Toyota and Volkswagen have fallen by more than 25%.
Ferrari wins by losing the least
The company with the smallest decline was Ferrariwhich is down only about 18% year-to-date — making it the automaker’s best-performing stock of the year.
What drove this achievement? For starters, the long-established maker of high-end sports cars isn’t like other automakers: it’s expected to sell around 13,000 of its jewel-like sports cars by the end of the year — fewer than giants like General Motors sell in a day. But these coveted cars walk out the door at an average retail price of around $322,000 each, according to FactSet estimates.
Even at these prices, the waiting list for a Ferrari is long. The company caps its annual production to maintain its pricing power and exclusivity, a fortunate situation that gives Ferrari exceptionally strong profit margins and ensures its factory is not likely to shut down any time soon.
Most Ferrari models were sold out for the year in early November, CEO Benedetto Vigna said during Ferrari’s third-quarter earnings conference call, and he doesn’t expect an issue with demand in 2023 — regardless of how the global economy behaves.
Vigna has good reasons for this view. Ferrari has several new models on the way to keep that waiting list long, including its first SUV-like vehicle, a sleek V12-powered four-door called the Purosangue, which starts at around $400,000 in the US, even at that price point – and even for a four-door Ferrari – demand is high. Though Ferarri won’t even begin deliveries of the Purosangue for a couple of months, the company temporarily halted taking orders last month after selling out the first two years of production.
“The company’s focus on the unparalleled quality and performance of its vehicles is unwavering and has a proven track record of robust financial performance as well as significant brand intangible equity and true luxury status,” John Murphy, analyst at BofA Securities, told investors in a note dated December 13, reiterating a Buy rating on Ferrari and a price target of $285.
The Tesla Story
And then there’s Tesla, which has proven to be one of the top auto stocks for investors over the past few years thanks to its tech-like valuation from Wall Street. Shares of the electric vehicle maker are down more than 68% year to date.
Much of the decline in Tesla shares can be attributed to CEO Elon Musk’s acquisition of social media platform Twitter. The stock has fallen more than 50% since the deal closed on Oct. 27.
“We believe increasing negative sentiment on Twitter could persist over the long term, limit financial performance and become an ongoing overhang for TSLA,” Oppenheimer analyst Colin Rusch wrote in a note this month downgrading shares by one achieve outperformance.
Wall Street analysts expect 2023 to be another choppy year for auto stocks. This is how legacy automakers as well as emerging EV startups have performed this year.
- Ferrari (RACE): -18%
- Stellantis (STLA): -25%
- Toyota(TM): -26%
- Nissan (NSANY): -35%
- General Motors (GM): -43%
- Volkswagen (VWAGY): -46%
- Ford (F): -46%
- Fisherman (FSR): -57%
- Tesla (TSLA): -68%
- Child (NIO): -68%
- Lordstown (DRIVE): -69%
- Nikola (NKLA): -75%
- Rivian (RIVN): -82%
- Lucid (LCID): -83%
- Kanoo (GOEV): -86%
– CNBC’s Michael Bloom contributed to this report.