Continental with 8% chance and 25% discount – columns

Continental with 8% chance and 25% discount

Like all stocks listed in the DAX in the automotive industry and its environment, the Continental share (ISIN: DE0005439004) is one of those stocks that are (still) trading just below their annual highs. If the general upward movement of the market continues, it shouldn’t be a problem for the share to break the annual high of EUR 120.86 on December 18, 2020.

The announcement by management that it intends to focus more on growth areas and future technology in the future, as well as the very optimistic latest analyst assessments, could further boost the share price. The analysis house Jefferies & Company recommends buying Continental shares with a price target of 150 euros.

The investment idea: Investing in discount certificates could be of interest to investors who forecast a stable price development for the Continental share after the strong price increases in recent months, but who want to generate positive returns after the price increase even if the price falls . Discount certificates enable cheaper entry into the share and reduce the risk of buying shares directly. On the other hand, in contrast to the unlimited profit potential of the equity investment, the return potential of the discount certificates is limited.

How it works: If the Continental share is listed at or above the cap on the certificate’s valuation day, which defines the certificate’s highest payout amount, the discount certificate will be repaid at the end of the term with a maximum amount of 95 euros.

The key data: With the J.P. Morgan Discount Certificate (ISIN: DE000JM5FH85) on Continental shares, the cap is 95 euros. The valuation date is December 17, 2021, and the certificate will be repaid on December 24, 2021. At the Continental share price of EUR 117.05, investors could buy the certificate for EUR 88.20. The certificate is therefore 24.65 percent cheaper than the share.

The opportunities: Since investors can currently purchase the certificate for EUR 88.20, it will enable a gross return of 7.71 percent over the next twelve months if the share price is above the cap of EUR 95 on the valuation date. This means that the share price can even fall by 18.84 percent before the maximum return on this certificate is in danger.

The risks: If the Continental share is listed below the cap of EUR 95 on the valuation day, the certificate will be redeemed at the closing price of the share determined on the valuation day. If the share price on this day is below the purchase price of the certificate, i.e. below EUR 88.20, then the certificate investment will cause a loss – before expenses.

This article does not constitute a recommendation to buy or sell Continental shares or investment products based on Continental shares. No liability is assumed for the correctness of the data.


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