*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed nor registered financial expert. Please see a financial advisor before making investment decisions.

*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed nor registered financial expert. Please see a financial advisor before making investment decisions.

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Despite making around 10,000 cars a year, did you know that Ferrari has a market cap of $32 Billion? 

During the pandemic, Ferrari was more valuable than other automakers like General Motors and Ford Motor Co. at one point mainly because investors were a lot more pessimistic on GM, Ford, and other automakers than they were on Ferrari. 

You might be thinking that Ferrari must be a bubble stock, that a valuation like that for an automaker is absurd. Well, their revenues for 2019 was 3.7 Billion Euros or $4.16 Billion US Dollars. Does that make Ferrari look overvalued now? If not, then consider that their net profit for 2019 was about 699 million euros or $785,150,000 US Dollars. Does it look overvalued now?

The reason why Ferrari was able to maintain its stock price and value during the coronavirus pandemic is that the exotic car market is a lot different than the mainstream auto market. Because the mainstream auto market relies on the average consumer, any event that impacts consumer spending directly affects the mainstream auto market. Meanwhile, the rich continue to grow rich or stay rich, allowing them to afford an exotic car like a Ferrari at any market condition and at any time. This makes exotic cars an inelastic good while regular cars are an elastic good. The fact that Ferrari only makes inelastic goods while selling them for a huge profit makes Ferrari a company that many people dream of owning. The safeness of Ferrari's business in all market conditions is what adds a premium to Ferrari's valuation.

Regarding those margins that Ferrari has, overall, they have a 24% margin after accounting for taxes, cost of goods sold, and other expenses. It's really good for an automaker since the auto industry is cutthroat and very fierce. That adds more premium to Ferrari's stock price. 

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With a strong racing heritage and a brand image that is admired around the world, investors find that to be helpful to Ferrari when navigating a volatile world. It adds safety to the Ferrari corporation. Both the heritage and the brand value add a premium to Ferrari's stock price as well.

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Some investors say that Ferrari's expansion into merchandising will be a significant growth catalyst for the company. Having its logo stamped on expensive jackets, shirts, watches, etc. the Ferrari brand is being spread around many places. While some fear that adding the Ferrari logo on many things will dilute the brand, Ferrari's management team says that they're selective on the brands that they're working with and are only looking to partner with high-end brands. That's why their merchandise is really expensive. 

Also, Ferrari has its own amusement parks called Ferrari World (Dubai) and Ferrari Land (Tarragona, Spain). The move to amusement parks has people worried even more about the company's brand being diluted. Because of the pandemic, Ferrari isn't able to generate revenue from those amusement parks and is probably burning cash in the meantime from it. 

Overall, there are many reasons why Ferrari's stock has been able to withstand the coronavirus sell-off. Since its products are inelastic in demand and come with huge margins, Ferrari's stock is seen as a great and safe stock to own in many investors' eyes. Also, Ferrari is venturing into merchandising and theme parks, making some concerned with the brand being diluted while others seeing it as a new revenue source and a growth catalyst. 

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As a Ferrari fan and someone who would want to invest in the company, I'm honestly unsure about whether I'd want to invest in the company or not mainly because there still seems to be a huge premium for the company's shares. Also, I find that their move to merchandising wouldn't be as significant as some would hope mainly because the cars sell for a lot more. Plus, I have my doubts that the Ferrari merchandise would be as popular as Supreme Merchandise.