Q1 2026 - Ferrari
Little's changed and that's what long-term investors should cherish
Last Tuesday, Ferrari released its Q1 figures which were a nothing-burger, as has been true for most of its past quarterly reports. Now, this is from a fundamental perspective; the share price has been far from static.
Last month, when Hermès reported its Q1 sales update, we shared:
Right now, we believe the only investable option in high-end larger cap luxury is Ferrari where the growing FCFs will be fully returned to shareholders in the form of dividends and buybacks. Ferrari’s just completed its first tranche of the multi-year 3.5 billion EUR program (250m EUR per tranche) ahead of schedule, and initiated the second one.
We project about 900 million EUR in buybacks in FY 2026 and 1.2 billion EUR next year, or a combined impact of slightly less than 2% annually of today’s market cap. Over the next decade, we foresee about 15 billion EUR in buybacks - a notable step-up from the recent years’ activity. Meanwhile, EBIT should grow at about 7-8% or better annually.
In a nutshell, Ferrari combines good earnings growth, resilience, and a much better excess cash generation profile. The last factor wasn’t there until very recently. Without this more meaningful income factor (50/50 split buybacks and dividends), Ferrari wouldn’t have made it to our portfolio. Excess FCF generation (excl. reinvestment through buybacks or reinvested dividends) drives 200 bps of the total expected CAGR.
Unsurprisingly, we continue to back this view, and quite frankly, the fact that little’s changed should be cherished by long-term quality growth investors. Yes, the share price has come down quite a bit over the last twelve months but if, back then, your base case math was pointing to a CAGR of 11% including buybacks, then today’s risk/reward has only gotten better. If you were satisfied with an 11% return, don't beat yourself up just because a better entry point appeared later.
The reason we’re focused on the total CAGR, as declared previously, is that any potential derating or rerating can/will have a considerably profound impact on the short-term (<5 years) stock returns, making it easier to mix price vs. fundamental momentum. If you’re long-term oriented, use a decade-long CAGR perspective, but simultaneously focus on the near-term share price dynamics and relative performance to gauge success, then it simply won’t add up and you’ll eventually change course. A 20% drop in say 9 months has a very noticeable impact on the short-term returns but does it matter over a 10-year long horizon? It’s a 1.8% annualized impact, which is not nothing but it feels enormous over that 9-month window. Whether you’re making 12% or 14% does not really make a difference as long as the low-end of the return exceeds your personal hurdle rate.
Anyway, let’s take a closer look at Ferrari’s quarterly performance and how it’s being well-shielded from today’s macro noise.
Despite its dismal 2025 and year-to-date share price performance creating a notable valuation reset, the stock’s compounded at a >12% CAGR including dividends over the past 5 years.