Formula One Group (NASDAQ:FWON.A), Ferrari (NYSE:RACE) and Aston Martin (LSE:AML) are among the most obvious stocks to watch as the F1 season kicks off in Albert Park, Melbourne, this weekend. Let’s take a look.
The American owners
Personally, I rue the day that Formula One Group, a subsidiary of Liberty Media, got its hands on the commercial rights for F1 racing. Since 2017, it’s transformed the sport, leveraging Netflix‘s Drive to Survive to captivate a global audience. But it’s come at the expense of traditionalists like me.
The series, offering behind-the-scenes access and humanising drivers and teams, has attracted younger fans and boosted F1’s popularity, especially in the US. This strategic move expanded commercial opportunities, increased race attendance, and diversified viewership, cementing F1’s modern resurgence.
However, would-be investors need to pay a premium to buy the stock. It’s currently trading at 46 times forward earnings, with earnings growth pointing to a price-to-earnings-to-growth (PEG) ratio around 1.8. This indicates the stock could be significantly overvalued.
A PEG ratio below one typically signals value. Nonetheless, investors could point to the limit coverage — only two analysts provide earnings forecasts — and the recent takeover of MotoGP, where it will hope to replicate its commercial success with F1.
Scuderia Ferrari
Luxury Italian car manufacturer Ferrari owns the F1 team Scuderia Ferrari, perhaps the most prestigious team in the sport. While success has been hard to come by in recent years, developments at the racing team can have an outsized impact on the Ferrari share price. In fact, the early 2024 announcement that Lewis Hamilton would be joining the team resulted in the shares jumping 20%. And they’ve remained expensive.
However, Ferrari stock, which is mainly valued according to the sales of its cars and other retail and service activities such as Ferrari World, is expensive. In fact, with the exception of Tesla, Ferrari is the most expensive car company. The stock trades at 45 times forward earnings, but with just 10% annualised earnings growth in the forecast.
Struggling Aston Martin
Aston Martin F1 isn’t owned by the company that makes the road cars, although the brand name and Lawrence Stroll connect the two. Interestingly, the stock surged two years ago when driver Fernando Alonso demonstrated that its F1 car for the season was very competitive. The apparent connection being that strong track performance could raise the brand’s profile further.
However, the momentum was short-lived. Off the track, the Aston Martin company and the stock are struggling. Shares in Aston Martin Lagonda plummeted in February as the luxury carmaker announced plans to cut 5% of its global workforce to save £25m annually, with half realised in FY 2025.
The business also announced that pre-tax losses for the year widened to £289.1m. Meanwhile, revenue fell 3% to £1.58bn, and wholesale volumes dropped 9% to 6,030. The company also delayed its first electric vehicle (EV) launch to the late 2020s.
Despite these challenges, Aston Martin aims for an improved financial performance in 2025, targeting positive adjusted EBIT and free cash flow in H2 2025. CEO Adrian Hallmark emphasised operational execution and financial sustainability as key priorities for the company’s turnaround.
Actually, out of the three companies on this list, Aston Martin is top of my watchlist. However, there’s too much risk to buy today.
This post was originally published on Motley Fool
