Pirelli share price is 6% down today and -32% YTD. Should I invest?

Pirelli share price is 6% down today and -32% YTD. Should I invest?
Written by:
Michael Harris
15th October, 12:32
  • Pirelli stock price is trading nearly 6% lower today after a deterioration in the risk sentiment worldwide
  • Shares are down 32% YTD as the price still attempts to recover from a huge pandemic-fueled shock
  • Buyers are advised to stay patient until the price action eventually comes to €3.5 before investing in PIRC

Pirelli (MIL: PIRC) stock price is 32% down year-to-end after the coronavirus pandemic dealt a big blow for all tyre makers around the world. The Italian company is now making strides to reboot its R&D department and improve its competitiveness amid ongoing challenges.

Fundamental analysis: Pirelli tweaks its R&D operations to stay on course throughout the pandemic

After being forced to close its factories in March due to coronavirus, the Italian tyre company Pirelli was in need of quick amendments to keep its business alive. 

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Pirelli’s new line of products was scheduled for launch in early 2021 so the company’s CEO  Pierangelo Misani pushed his technicians and IT experts to get more research and development online in order to enable engineers to conduct virtual tests. 

The pandemic sent Pirelli’s revenue down by a third in the first half of the year. The company had to keep its new tyre operations alive for its sales to bounce back next year.

“There are moments of crisis, like COVID, when you have to reshape and make yourself more efficient and that’s what we’re doing,” Misani told Reuters.

The Milan-based company has 19 factories across 12 countries and it is the only notable manufacturer operating solely in the consumer tyre market, producing tyres for luxury cars, motorcycles and bicycles – as well as Formula 1 racing cars.

The company achieved best results in the replacement market where it’s expecting to roll out three new sets of products by the start of next year – an ultra-high performance tyre for summer use, a new all-season tyre and a new winter tyre, said Misani.

“The epidemic prompted us to engineer tools to boost simulation and modelling and we’ll be ready in plenty of time for the launch,” Misani said.

Similar to other companies in the car industry, Pirelli has been also making a transition to digital over recent years thanks to the possibility of virtual engineering. The company is keeping up the on-the-road testing as there are factors where it is still better to perform tests in a physical environment.

Technical analysis: Shares plunge

Shares of Pirelli are trading nearly 6% lower today after a deterioration in the risk sentiment worldwide. Pirelli stock price is now threatening to post the biggest daily loss in over 4 months. 

Shares are down 32% YTD as the price still attempts to recover from a huge pandemic-fueled shock. Today’s ugly close is likely to further invite the selling pressure on PIRC as short sellers aim for the crucial support at €3.5. 

Summary

Shares of the Italian carmaker Pirelli are trading nearly 6% down today to push the YTD loss to 32%. Although Pirelli share price is cheaper now than in the beginning of the year, it’s advised to stay patient until the price action eventually comes to €3.5, which offers a solid investment opportunity from the risk management perspective.

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