Ferrari's (RACE) brand remains intact, with residuals bottoming and wealth creation optionality in a K-shaped economy supporting a re-rating of the stock, Morgan Stanley said in a Monday research report.

Brand risks appear overstated and the company's Luce electric vehicle risks are likely priced in, analysts wrote, adding that disciplined allocation can limit any brand damage while leaving option value with new customers.

The initial de-rating was driven by concerns around hybrid residual values and the launch of Luce, but channel checks show the market has gone too far in labelling these factors as terminal brand risk, according to the note.

Residual values were the top concern earlier, especially for hybrid models, but current trends imply that the negative residual cycle has mostly troughed, the brokerage stated.

The brokerage said it upgraded the stock to overweight from equalweight and boosted its price target to $438 per share from $388.

Price: 373.34, Change: +18.43, Percent Change: +5.19