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.
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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!
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