What Makes Ferrari (NYSE:RACE) a Better Stock Than Tesla (NASDAQ:TSLA)

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The Elon Musk led Tesla (NASDAQ:TSLA) has emerged as the most valuable carmaker in the United States, but the company still has to go a long way to become the best-performing automobile business. That title goes to the carmaker from Italy Ferrari (NYSE:RACE). This can be seen clearly by the way the Ferrari stock has behaved over the last one year. Shareholders have been rewarding the company big time lately, with its shares going up by a massive 74 percent in the last year.

Better Than Expected Earnings for Ferrari

Ferrari reported better than expected quarter four earnings of $271 million or €251 million, largely because they could increase the production of the special-edition supercars like the LaFerrari Aperta convertible that sells for $2.1 million. The Ferrari stock gained further momentum after the Q4 results of 2016 were declared.

The Tesla stock has done well in the last 12 months too. It has gone up by 25 percent since the company announced they are entering the mass-market with their Model 3. But when it comes to performance, the stock is still way below Ferrari.

Vincenzo Longo, a strategist at IG Market in Milan says, “Investors have been discovering Ferrari and its ability to boost margins since the IPO, while Tesla, which benefits from being seen as the front-runner in the electric market, still needs to show it can generate adequate profits”.

Tesla is growing fast, but the company is yet to show a profit. Ferrari, on the other hand, earned $450 million or €425 million last year. Tesla briefly became the biggest automaker in the United States by market value, with a capitalization of $50.3 billion, while Ferrari’s market value is $13.6 billion.

Ferrari a Better Stock than Tesla?

Michael Tyndall, an analyst with Citigroup feels Ferrari has more scope to grow. Its volume has the potential to double in the next 10 years. “Ferrari and Tesla represent two different ways on how the auto industry is evolving, and they can easily coexist. The person who buys a Ferrari does it not just for moving from one place to another in an eco-friendly way: He does it for passion and the fun of driving a supercar”, he says.

Investment banker Jefferies & Co. has given the Ferrari stock a “buy” rating. Jefferies says Ferrari (NYSE:RACE) will outperform the rest of the stock market. Profits of the company are likely to grow exponentially over the next five years.