Segment employs its hub position to implement GDPR deletion or suppression requests

Topline

As Tesla shares skyrocket to new highs Monday, Morgan Stanley analyst Adam Jones said his favorite stock in the booming electric vehicle industry is actually luxury car-maker Ferrari, which is expected to fuel competition in the space when it enters the market later this decade.

Morgan Stanley's Adam Jonas forecasts Ferrari shares could climb 10% to $265 over the next year, ... [+] driven largely by the firm's burgeoning electric vehicle business.

Getty Images

Key Facts

In a weekend note to clients, Jonas called Ferrari his "favorite electric vehicle stock" and said the firm's market capitalization of about $60 billion "assigns little to no value" to the company's electric-vehicle business, which is expected to start selling cars in 2025. 

Jonas expects Ferrari's electric vehicles to make up more than 30% of its total vehicle sales by 2030 and he set a one-year target of $265 for the company's stock, about 9% above current prices; the Italy-based manufacturer sold about 9,100 cars last year.

He cites Ferrari's access to investment capital, record two-year order backlog and pricing power in the luxury market as reasons it could emerge as one of the strongest players in the electric vehicle market.

Morgan Stanley estimates Ferrari will spend a majority of its $13 billion in capital expenditures this decade to help develop battery-powered electric vehicles, which Jonas says should be unveiled to the public by 2024 at prices approaching $400,000. 

Some investors remain skeptical of Ferrari's plan to go green: In June, Goldman Sachs analysts said the transition creates "uncertainty around potential future capital expenditure requirements," estimating the expansion will drive up costs by more than $800 million this decade. 

Ferrari shares climbed 3% Monday to $244; the stock is up 7% this year, compared to 25% for the S&P 500.

Key Background

Though Ferrari started teasing its electric-vehicle plan years ago, the company's chairman only confirmed its ambitions in the space earlier this year. “You can be sure this will be everything you dream,” billionaire Chairman John Elkann said at the firm's annual meeting in April, adding that the firm's all-electric car will debut in 2025. Patents filed last year reveal Ferrari has been working on a two-seat electric vehicle, with a motor powering each wheel—a powertrain layout also used by other electric-carmakers, including Lotus and NIO.

Tangent

A growing fervor around electric vehicles has also helped lift shares of Tesla in recent weeks. The stock has surged nearly 29% since recently bankrupt Hertz announced it placed the company’s biggest order ever on October 25, buying 100,000 Tesla cars in a bid to turn around its ailing car-rental business by electrifying its fleet of vehicles.

Contra

Alluding to the same risks as Goldman earlier this summer, Jonas says unforeseen engineering and development costs pose the biggest risks to Ferrari's electric vehicle play. 

Surprising Fact

Shares of Ferrari have skyrocketed 330% since the legacy car-maker's debut on the New York Stock Exchange in 2015. 

Further Reading

Ferrari Confirms First All-Electric Car Will Arrive In 2025 (Forbes)

Tesla Eclipses $1 Trillion In Market Value After Hertz Places Biggest Electric Vehicle Order Ever (Forbes)

Source : Forbes - Investing