Ferrari actually belongs to Fiat Chrysler, which had a 90 percent stake in the company before the IPO. Ten percent of that stake has now been sold to the public, so it now claims an 80 percent stake. This deal was the first step in a spin off that will result in the complete separation of Ferrari from Fiat Chrysler.
Fiat Chrysler believes that Ferrari can get a higher valuation as an independent company, which made sense to Cramer. However, Ferrari is not like other automakers. In its IPO prospectus, the company stated that demand outstrips supply for Ferraris, and it plans to keep it that way.
Meaning, it deliberately limits the supply of new cars to bolster its strategy of selling cars at such a high price. And while that is great for pricing, it is bad news for growth; it's hard to grow a business that isn't willing to sell more cars.
But the main reason that Cramer is not a fan of Ferrari's stock is the valuation. At its current price of $55, Ferrari has a market capitalization of $10.5 billion and trades at 31 times last year's earnings.
"Given the company's anemic growth rate, I think that is a fairly expensive price-to-earnings multiple," Cramer said.
Especially considering that General Motors trades at just 11 times earnings, Ford sells for 13 times earnings and Fiat Chrysler for 18 times earnings. Ferrari's valuation leaves all of these companies in the dust. So, while it has a better product than its competitors, it doesn't have better financials. Cramer would rather own Fiat Chrysler.
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Of course, it is important to remember that this IPO has only put 10 percent of its share count on the public market. Fiat Chrysler still owns 80 percent, and it plans to spin off the remaining shares sometime in early 2016.
"In other words, in a few months a huge slug of additional stock will get dumped on the market, and I bet Ferrari's share price gets slammed. If you want to buy this one, I suggest you wait until Fiat Chrysler unloads the rest of their stake, giving you a better buying opportunity," Cramer added.
No matter how amazing the product is, Cramer simply cannot get behind a stock at these valuation levels. They are exorbitant given the company's slow growth rate. That doesn't mean the stock can't go higher, it just means that it is too darned risky for Cramer.