By Senad Karaahmetovic
Morgan Stanley analysts introduced Ferrari (NYSE:RACE) as a new Top Pick in the firm's research coverage of the U.S. auto sector. Ferrari replaces Tesla (NASDAQ:TSLA) as the top U.S. auto stock to own as the analysts see an attractive risk/reward in the luxury carmaker.
The price target on Ferrari stock is also raised to $310 per share from the prior $280, signaling an upside potential of nearly 15% relative to Friday's closing price.
"We believe RACE is the best positioned company in our coverage in a highly uncertain macroeconomic and geopolitical tape. In addition to its strong fundamentals, we believe RACE has levers to pull for both growth or downside protection, within a wide dispersion of macro outcomes," the analysts clarified in a client note.
The belief in RACE is based on two key factors: 1) long-term opportunities in EV and new models; and 2) predictable business model "near unmatched brand and market moat."
On the EV front, they believe the Italy-based luxury carmaker "can offer an EV that will be just as high in demand as what investors are used to from ICE."
"We believe investors over-estimate the risk of EVs to Ferrari and misprice the inherent opportunity in EVs coupled with continuing the ICE business on an exclusive basis with price points for ICE approaching $1mn/unit," they added.
Ferrari stock is up almost 27% year-to-date (YTD).