Juventus – The Bold Lady

Juventus shares hover near a 15-year high as the five times Ballon D’Or winner, Cristiano Ronaldo, injects some gold into ‘The Old Lady’. Shares in the Italian club have gained 130% in only 8 weeks.
Carlo Alberto De Casa
Source: Sport.net
Source: Sport.net

It was the beginning of July, at a time the World Cup was keeping millions of football fans worldwide glued to their TV screens, that the first rumors started to swirl about the most famous football player worldwide, Cristiano Ronaldo, making a surprise move from Real Madrid to Italian club Juventus.

It was a bold move on the part of ‘the old lady’, how Juventus is affectionately called by its supporters. But it was one that so far paid off.

At that time, Juventus shares were trading at around €0.65. In less than a week since the rumor first started, the price jumped to €0.92, before correcting to €0.80 after the official announcement of the transfer, as traders ‘bought the rumor and sold the news’.

The sudden move of the best footballer of his generation (and arguably of many others), from Galacticos to the Italian club, was big news for football aficionados around the world. It was a major business transaction too.

And one with wider repercussions than first thought.

Those who thought the rally would run out with the announcement were wrong. The decline of ‘Juve’ shares only lasted for just a couple of days; the price quickly recovered to €0.90 and went on to embark a major rally that few could expect.

The first psychological target of 1 euro was reached in August, but that wasn’t the end of it. Another impressive sprint at the end of August propelled the price to €1.20, well above the peak reached in May 2017 at €1.04.

This added further bullish pressure, with shares jumping to a fresh 15-year-high at 1.63 on September 11.

Juventus’ market capitalization has jumped from €650 million to €1.5 billion in just 8 weeks, a massive +130% growth.

The Gold Lady

The rally is even more impressive when considering that the share price was heavily depressed only a couple of years ago when Juve shares were trading below €0.30.

Obviously, the price is not purely reflective of Ronaldo’s arrival.

The market is taking into account the growth of the brand too, with the team, led by coach Massimiliano Allegri, firmly back in the European football Olympus, as proved by its two Champions League finals in the last four editions of the major tournament.

In this year’s Champions League, Juventus will play against Manchester United, another listed team. Its market capitalization is above £4 billion, or 3 times that of the Italian team.

A more careful analysis would suggest that Juventus’ share price has risen more than the added value Cristiano Ronaldo can provide, especially once you take into account the huge costs of his move and his salary.

As an investor, you could look at it from two points of views.

You could consider the entire football world as inflated and vulnerable to a burst if TVrights and other types of income decline in the next few years.

Or you can think Juventus shares are still a bargain when compared with much more expensive teams such as Arsenal, with a market cap of just below £2 billion, or Manchester United, worth some £4.2 billion.

For now, at least, the Portuguese talent is certainly giving the old Lady a fresh lease of life. And what a life that is.

This article was written by Carlo Alberto De Casa, Chief Analyst at ActivTrades

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