PEERS & MARKETS

The week definitely started with a downturn in the major European market (Milan -4.1%, London -2.1%, Frankfurt -2.6%, Paris -2.1%, Madrid -2.2%). Tensions over Spain’s debt (spread Bonos-Bund at 415 points) and the uncertain outcome of elections in Greece and France are making markets very volatile and encourage selling. The negative sentiment is also fuelled by U.S. macroeconomic data on new jobs and unemployment, which proved to be worse than expected.

Bearish attitude also in the Auto&Parts Industry (-4.7%), after the strong rebound earlier in the year (up +20.5% since January 1, 2012).

Pirelli closes the week at 9.355€ (+0.6%) against the trend of the sector and of the reference market. Over 5 million shares, the daily average of dealings. HSBC upgraded Pirelli stock to 15€ (from 12€), confirming its “Overweight” recommendation. The average Consensus Target Price, therefore, goes up to 10.3€ with 96% of analysts covering the stock giving positive recommendations.

PEERS & MARKETS

Fears about the stability of the euro continue to affect the trend in financial markets in the week 11-15 July (Milan -3.1%. London –2.5%, Paris -4.8%, Frankfurt -2.5%).

Pirelli bucked the trend of the Milan stock exchange and the Stoxx Auto (+6.6pp; +2.6pp) ending the week at €7.66, a rise of 3.7%. The shares, which have recorded growth of 26.5% since the start of the year, were also sustained by the Goldman Sachs upgrade of its TP to €11.0.  High pricing power and continuous improvement of its mix characterise the Pirelli equity story, according to the broker. The market is not ignoring potential growth in Pirelli’s profitability, predicting a group ebit margin of 9.9% in 2011 and 12.7% in 2013.

PEERS & MARKETS

Fears that economic growth would be slowed by repeated anti-inflation measures taken by China and India  caused a downturn in the international stock markets in the week 2 to 6 May (Milan –2.1%, London –1.5%), Paris +1.2%, Frankfurt –0.3%).

Sales in the Auto&Parts sector (Stoxx index -1.3%) were affected by the profit-taking that followed an excellent reporting season, and widespread uncertainty about the impact of the disaster in Japan and the pressure raw material market prices might exert on second quarter results.  

Pirelli closed at €6.96 (-0.9%) outperforming both the sector index (+0.4pp v Stoxx Auto) and Piazza Affari (+1.2pp) with an average of over 5 million trades. After the publication of the Q1 2011 results, which were better than expected, analysts were positive, with revised guidance for 2011. There were many increased valuations, by 60 eurocents on average, with a TP of €8.2 (with an average TP of 7.9 for the whole coverage). The most prevalent recommendation was Buy ((82% of total coverage).