Electric car company Tesla (TSLA, Financial) has taken center stage this year, with the drama of high returns, sudden stock tumbles and short-seller pontifications. But in the past two years, a traditional, fossil-fuel-loving, luxury car company, Ferrair (RACE, Financial), has raced past the one promising to redefine the future on a long- and short-term basis.
Ferrari celebrated its 70th anniversary this year, and it began trading on the New York Stock Exchange in October 2015. The IPO came before its January 2016 spin-off from Fiat S.p.A., which owned 90% of its shares since 1988. Sergio Marchionne, the chairman and CEO, joined Fiat S.p.A. in 2004 and was instrumental in the merger between Fiat Group and Chrysler Group in 2009. Its CFO, Allessandro Gili, held positions with Fiat from 2002 to 2014 before advancing to his role at Ferrari in 2015.
Since joining the U.S. exchange, Ferrari investors have received superior returns over several time frames than Tesla’s. From October to Friday, July 14, the maker of the curvaceous Italian vehicle has gained 71%, versus a 55% rise for Elon Musk’s company. In the past year, Ferrari advanced 122%, compared to 48% for Tesla.
Year-to-date performance changed the trend for Tesla. It exceeded Ferrari for most of the year, as investors anticipated the rollout of its least pricey model that more of the population could afford and investors embraced the possibility of a shift to a new kind of car. Then, on negative headlines, Tesla’s stock price dropped through most of June, falling below Ferrari. It subsequent rebound, however, began to close the gap in July. Ferrari is up 59% year to date, and Tesla 50%.
Not only surpassing Tesla, Ferrari over the past year has delivered higher returns than all U.S.-traded automakers, including Ford (F, Financial), GM (GM, Financial) and its former owner, Fiat Chrysler (FCAU, Financial).
Ferrari has a higher profitability rank than Tesla, though Musk's company more than doubles its amount of revenue and market cap. Ferrari is also far more expensive based on a price-book ratio of 45.3 compared to 10.7, though Tesla trades for 5.94 times sales compared to Ferrari’s 5.05.
Ferrari supports a more attractive operating margin, at 20.6% compared to Tesla’s negative 7.9%, with net margins of 10.75 versus negative 4.4%. Ferrari, the established company, also pays a dividend of 75 cents per share and Tesla, a growth company that reinvests its gains, does not.
Though David Einhorn (Trades, Portfolio) has taken a short position in Tesla, investor sentiment has also improved as signaled by the short interest in the company. Short interest in Tesla as a percentage of float had decreased to its lowest of 2017 on June 30, to 26.08%, from 38.34% at the beginning of the year.
