It took Puma SE, the company behind the well-known apparel and footwear brand, just under twelve months to lose over 64% of its valuation. The stock reached an all-time high of €115.40 in November, 2021. By November, 2022, the share price had dropped to as low as €41.31 despite annual sales growth in the mid-teens.
On the bright side, the market is finally starting to give Puma’s improving fundamentals some credit. The stock has been on a roll over the past few months, exceeding €67 at the start of February, 2023. Currently hovering around €60.50, investors are probably wondering if the bottom is finally in at €41.31. We’ve been wondering the same thing and the Elliott Wave chart below looks promising with a caveat.
Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!
The recovery from €41.31 to €67.34 looks like the first three waves of a five-wave impulse pattern. It is labeled 1-2-3, where the five sub-waves of wave 3 are also visible. The most recent dip to €58.70 seems to be a simple a-b-c zigzag correction in the position of wave 4. If this count is correct, we can expect another push higher in wave 5 to complete wave (1/A).
Elliott Wave Setup and Valuation Make Puma Stock a Pass
The theory states that a three-wave correction follows every impulse. So instead of jumping on the bull wagon near the €70 mark, investors should prepare for a notable decline in wave (2/B). Only once this 5-3 Elliott Wave cycle is complete would the risk/reward ratio be attractive enough in anticipation of wave (3/C) up. Besides, the company is expected to post roughly €2.60 in earnings per share in 2022, making the stock not exactly cheap at a P/E of 23.
In conclusion, Puma stock seems to have finally turned a corner. However, both high valuation and a rather bearish Elliott Wave setup currently keep us on the sidelines. The EWM Interactive Stock Portfolio consists of 18 other companies we like better. Check them out now!
In our Elliott Wave PRO subscriptions we provide analyses of Bitcoin, Gold, Crude Oil, EURUSD, USDCAD, USDJPY and the S&P 500 every Sunday and Wednesday! Check them out now!