International stock markets performed well during the week from the 10th to the 14th of October (Milan +4.9%, London +3.1%, Frankfurt +4%, Paris +5.1%). Markets benefited from the speech of the President of the European Commission, which favoured a stronger European Financial Stability Facility.
A strong increase for the auto sector: the DJ Stoxx Auto rose by 10.8%.
Pirelli closed the week at €6.4 (+13.7%), outperforming the Milan stock market (+8.8pp), the sector index (+2.9pp) and its main peers (+3.6pp v. Michelin, +1pp v. Continental). The share price was sustained by the positive reports of Intermonte (Outperform and TP to 7.5€ from 5.7€) and Mediobanca (Outperform and TP to 7.0€ from 6.9€). According to Intermonte, the scenario is improving for Pirelli and the sector compared to the beginning of August: 1) solid winter demand (winter season 2011 should be better than last year); 2) valuations are attractive since the sector and Pirelli are at a record low; 3) further cuts of consensus estimates are not likewise; 4) positive expectations for the business plan; 5) possible regulatory changes that will have a positive impact on the sector (mandatory winter tires in France and new minimum tread thickness in Germany).
The mean consensus TP is 7.95€ with BUY recommendations from 92% of brokers.