Pandora necklace

Pandora splits its shares despite record sales in 2021

We Danish Jeweler Pandora A/S (CSE:) (OTC:) five months ago. In mid-September, the stock was hovering around DKK 840 after a phenomenal rise from DKK 180. In addition, the company was doing well commercially. The fourth quarter of 2021 was expected to conclude a very good year for Pandora.

Despite the positive fundamental developments, however, we believed that the “the stock may need a break.“Our reason for caution was purely technical. A quick look at the Elliott Wave chart below convinced us most of the rally was already behind us.

Pandora’s daily chart revealed an almost complete five-wave pulse pattern. Waves 1-4 seemed to be in place already. The fifth and final wave was still missing. The fifth waves usually exceed the end point of the corresponding third wave. With this in mind, we wrote that “goals above 900 DKK seem reasonable.

On the other hand, the theory says that each pulse is followed by a correction. This meant that once wave 5 was over, it would make sense to “expect a pullback to around 700 DKKin wave (2).

Record 2021 sales didn’t translate to new records for Pandora stock

Five months later now, Pandora is arguably in its best shape. It has little debt, which allows it to return excess profits to shareholders in the form of buybacks and dividends. Furthermore, with sales of DKK 23.4 billion, 2021 was its best year, Indeed. The stock, however, is not doing so well.

Pandora Daily Chart

Wave 5 took the stock price to DKK 950 in November 2021. At a time when Pandora was making the strongest sales in its history, the bears were already taking control. Earlier this week the stock fell to 667 DKK, down 30% from the peak of the wave (1).

their last Annual Report helped the bulls recover some losses and push the stock to a daily close of 741 DKK. However, we do not believe that wave (2) is over. Indeed, the recent decline looks more like a forward diagonal in wave A than a full correction.

In other words, we believe that a temporary recovery from wave B to ~850 DKK can be expected before wave C drags the stock below 600 DKK. With an estimated EPS of 60 DKK in 2023, Pandora would then be a real bargain.

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