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Investor Channel is the communication channel between Pirelli and the financial community. Analysts, shareholders and web users can use the channel for direct dialogue with the Group. The blog is moderated by Pirelli Investor Relations.

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PEERS & MARKETS

The week from May 27 to 31 was a mixed one for major European stock markets (Milan +1.9%, London -1.7%, Paris -0.2%, +0.5% Frankfurt, Madrid +0.7%). The positive U.S. macroeconomic data (consumer confidence in May to the highest level since February 2008, first quarter GDP growth of 2.4% QoQ) drove upward stock prices in the early sessions of the week but caution prevails among operators waiting for more visibility on the evolution of the Fed monetary policy: the U.S. Central bank may stop the current Quantitative Easing in light of the positive economic data.

European Auto&Parts stocks continued to rise last week gaining 3.1%: according to Morgan Stanley, the sector benefited last month from sustained purchases by investors (+11.8% the performance of the European index; +10.4 pp vs. DJ Stoxx 600) following the prospects of a recovery in the second half of 2013. An important signal will be given by the forthcoming publication of May car registrations data.

Pirelli ended  the week at € 8,945, a rise of 4.9% with an average daily trading volume of around 1.8 million. Goldman Sachs has revised the recommendation on the stock to Neutral (from Sell) and the target price to € 9.8 from € 7.6: the increase in valuation reflects the reduction in the cost of capital and the revision of the estimates on profitability; the positive view on the sector was confirmed. The consensus target price stands now at € 9.3 with 40% of the coverage with a Buy recommendation.


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PEERS & MARKETS

Fears about the debt of Eurozone countries and the difficulties about the agreement on US government borrowing (agreed on Sunday 31 July)  dominated stock markets in the week 25-29 July. On the main financial markets prices fell by an average of 3%, with a fall of 5.3% in Milan due to the high incidence of bank shares: this was also the worse-performing sector in Europe as a whole (-5%).

Sales in the auto&parts sector (-4.8%) despite the good results in the 2Q reporting season, already anticipated in full by stock markets.

Pirelli closed the week at € 7.24 outperforming the Milan stock market (+5pp), the sector index (+4.7pp) and its main peers (+7.6pp v. Michelin, +3.9pp v. Continental, +6.2pp v. Nokian). The share price was sustained by the agreement on Russia and the results of 2Q 2011, which exceeded market expectations. According to Intermonte, the agreement reached on 25 July between Pirelli, Russian Technology and Sibur will allow Pirelli to immediately enter a high profitability market. The analysts comments about Pirelli’s results were positive: “an excellent quarter” demonstrating the solid positioning of the business and high pricing power. There were six upgrades in the TP for the share: Banca IMI (€8.92 to €9.7), Banca Aletti (from €8.50 to €9.50), Exane (from €9.70 to €10), Banca Leonardo (from €8.2 to €10.1), Axia (from €8.2 to €9.0) and Chevreux (€8.0 to €8.20). The mean consensus TP is 8.80€ with BUY recommendations from 92% of brokers.


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PEERS & MARKETS

The week of July 18th has been a positive one for major international markets (Milan +5.5%, London +1.6%, Paris -0.7%, Frankfurt +1.5%). After starting with a strong downswing, listings benefitted from the EU decision to relaunch the new bailout plan for Greece, by also involving private financial institutions.

Strong buybacks in the banking industry posted the best European performance: +5.7%, the reference Stoxx.

Sales in the tyre Industry: June and second quarter market data marked a slowdown in sales volumes compared to the first quarter of 2011. Major stocks underwent a downturn: Continental -3.5%, Nokian -3.2%, Michelin -2.8%. Pirelli, the best equity in the industry from the beginning of the year, closed the week at 7.25€ (-5.3%). Pirelli shares were upgraded by Exane, whose rating went from Neutral to Buy and a 9.7€ TP, and by Centrobanca, Buy and 9.5€ TP. Merrill Lynch took another view and started buying Pirelli when it was rated Underperform, with a 7€ Target Price. According to the latter broker, Pirelli overperformed the industry and its main peers in the last two years, because of an “appealing restructuring story” and a sound “earning generation”. The company can also count upon a strong brand, an efficient cost structure, robust pricing power and “an experienced management team”. The broker’s view of 2011-13 plan targets is again different: the growing competition in LatAM, as well as in Europe, could hinder the company’s ability to increase its profitability.

Pirelli average consensus Target Price is of 8.54€ with 96% of brokers buying the security at Buy rating.



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