Investing.com -- Morgan Stanley on Monday upgraded Ferrari (NYSE: RACE) (BIT: RACE) to Overweight from Equal Weight as the bank argued the stock’s recent selloff has gone too far in pricing in temporary rather than structural risks.

The Wall Street firm also raised the price target to €380 from €330, implying roughly 24% upside as of Friday’s close.

Shares in the company jumped 4.4% in Milan trading Monday by 07:36 GMT.

Shares in the Italian automaker have fallen about 26% over the past 12 months, while consensus earnings estimates for 2026-27 were trimmed by only around 4% over the same period. The move, Morgan Stanley analysts note, "has been driven partly by negative earnings revisions, but primarily by multiple compression."

"Our latest work suggests the market has moved too far in pricing these issues as terminal brand risk," the team led by Edouard Aubin wrote.

The de-rating had been driven by concerns such as a slower growth algorithm laid out at Ferrari’s October 2025 capital markets day, pressure on residual values for hybrid models including the 296 and SF90, and uncertainty around the Luce, the company’s first battery-electric vehicle.

However, the analysts said its dealer checks in the U.S. and Europe suggest none of these has translated into lasting brand damage.

On residual values, which the bank described as the most important swing factor, dealer feedback indicated the worst is likely behind. The 296 GTB was repeatedly described as at or near the floor, with transaction activity picking up, while SF90 Coupe and Spider values appear to be stabilising after a significant reset.

The analysts also noted that Ferrari’s broader electrification push appears to have rekindled collector interest in older internal-combustion models, which they see as supportive for the residual-value ecosystem overall.

Regarding the Luce, analysts acknowledged dealer feedback has been mixed to negative in the near term, with criticism centred on design, pricing at €550,000 at launch in Italy, and questions about the target customer.

However, they argued the market is already pricing in a weak reception and that disciplined production allocation "can limit any brand damage while leaving option value with new clients."

Morgan Stanley also pointed to Ferrari’s exposure to the so-called K-shaped economy as a structural tailwind, noting that wealth creation remains concentrated among the ultra-high-net-worth individuals most relevant to the brand.

Property consultant Knight Frank projects the global UHNWI population will grow by around 235,000 between 2026 and 2031, with the U.S. accounting for roughly 58% of that increase.

Morgan Stanley lowered its weighted average cost of capital (WACC) to 7.5% from 8.1% to reflect higher confidence in Ferrari’s demand durability, and raised FY27-30 earnings estimates by around 2% on average.