On Friday, an analyst from Jefferies maintained a Buy rating on Pirelli & Co (PIRC:IM) (OTC: PLLIF), with a steady price target of €6.90. Pirelli, known for its premium tyre segment, continues to be a favored stock ahead of its earnings report, with potential for consensus upgrades or even an uplift in the company's financial guidance.
The analyst highlighted that Pirelli's stock has experienced a devaluation, moving from 8.5x to 8.0x on an EV/EBIT basis. This shift has resulted in the company trading at approximately a 10% discount compared to Michelin (EPA:MICP), which marks a notable change from its historical premium that ranged between 22-23.
Pirelli's strong brand presence in the premium tyre market, which accounts for over 75% of its revenue, was emphasized as a key strength. The premium tyre segment not only yields higher margins but also grows at an accelerated pace and presents significant barriers to new entrants, supporting the company's competitive position.
The reaffirmed Buy rating reflects confidence in Pirelli's market stance and financial health. The analyst's commentary suggests that the current valuation presents a favorable opportunity for investors, given the company's robust fundamentals and the potential for positive revisions to earnings forecasts or company guidance.
The endorsement from Jefferies comes as Pirelli prepares to disclose its earnings, an event that could potentially influence the stock's performance and investor sentiment depending on the outcome. The firm's analysis anticipates that the forthcoming earnings report could catalyze a positive shift in market consensus regarding Pirelli's financial trajectory.
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