Donald Trump plans on raising tariffs by 10% on goods from China and 25% on all imports from Canada and Mexico after taking the office in January.
The announcement he recently made on Truth Social spells trouble for European automakers as many of them rely rather significantly on factories and suppliers based out of Mexico.
But there is one Italian car company that’s broadly expected to remain insulated from Trump tariffs – Ferrari NV (NYSE: RACE).
Why is Ferrari better positioned to navigate Trump tariffs?
Ferrari is protected against new taxes under the Trump administration for more than one reasons.
For starters, it’s production is entirely based in Maranello, Italy.
“Ferrari is an exception since whatever the tariff is, they are not going to start producing in the US,” as per Morningstar analyst Rella Suskin.
Additionally, Ferrari is uniquely positioned to easily pass on the added cost from raised tariffs to its customers.
Even if Trump increases taxes by 30%, it’s extremely likely that potential buyers of Ferrari will remain unfazed. “It’s ridiculous, but that’s kind of the way it is,” she added.
Earlier this month, Ferrari said its shipments were down 2.0% in the third quarter.
But that “doesn’t reflect a demand deficit. Rather [it] demonstrates Ferrari’s ability to allocate its shipments to suit its margin aspirations,” as per Bernstein analysts.
The investment firm expects a year-over-year increase in shipments in the company’s current financial quarter. Ferrari stock is currently up more than 35% versus the start of 2024.
Should you buy Ferrari stock for 2025?
Ferrari itself hasn’t shared its view on what Trump tariffs may mean for its business moving forward.
But many analysts, including Tom Narayan of RBC Capital, see the European luxury sports car manufacturer as uniquely positioned to navigate the new taxes for the above-mentioned reasons.
In fact, Ferrari’s customers are a lot less price sensitive compared even to the likes of Porsche, according to Rella Suskin.
“They could pass on a 10% tariffs but bigger, such as 30% might be a bit more difficult to pass onto customers,” she told CNBC in an interview today.
That’s part of the reason why Ferrari stock has outperformed its European peers, including Renault and Mercedes – and Wall Street expect it to unlock further upside in the coming months.
Analysts currently have a consensus “overweight” rating on RACE shares. Street’s average price target of $487 on them indicates potential for another 13% gain from current levels.
Experts are bullish on Ferrari also because its financials remain strong.
On November 5th, Ferrari recorded a 7.0% increase in core earnings for its third quarter. The US listed shares of Ferrari, however, do not pay a dividend at writing.
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