Toyota (NYSE: TM) shares have advanced from $132 above $160 since the beginning of October 2020, and the current price stands around $153. This company offers a very good opportunity for investors, and with the market capitalization of $214B, it is still undervalued relative to the other automobile manufacturers.
Fundamental analysis: Toyota increased its forecast for the full fiscal year ending March 2021
Toyota is the largest automobile manufacturer in Japan and a global market leader in sales of hybrid electric vehicles. Even in this pandemic environment, Toyota’s business is going well, and the company reported better than expected FQ3 results.
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Total revenue has increased 7.1% Y/Y while FQ3 2021 net income advanced 14% on a yearly basis. Toyota increased its forecast for the full fiscal year ending March 2021 by 100,000 units to 7.6 million units.
As for Toyota and Lexus brand vehicle sales, Toyota expects that vehicle sales will be around 8.9 million units, a 300,000 unit increase from its forecast that was announced in November 2020. The vehicle sales in Q4 should be approximately 110% of the same period in the previous year.
“The environment surrounding us remains highly uncertain considering the ongoing spread of COVID-19. While carefully monitoring the risks, we will continue to make efforts together with all our stakeholders, including cost reduction efforts at all levels and efforts at manufacturing sites and sales outlets,” said Kenta Kon, Chief Financial Officer of Toyota.
Toyota announced its plans to launch three new electrified models in the U.S. market this year, and according to analysts, EV sales in the U.S. should grow to 2.5% in 2021 (EV sales were 1.9% of total retail sales in the U.S. in 2020). The positive news is that auto sales in China rose 25.7% in January, representing the strongest growth since September 2016.
This company’s fundamentals are excellent, and with the market capitalization of $214B, Toyota is still undervalued relative to the other automobile manufacturers.
There are also some risks when it comes to buying Toyota shares, and there are several negative facts that are connected with this company. The negative fact is that the company suspended its vehicle production on 14 lines at nine plants in Japan due to an earthquake.
It is also important to say that European car registrations fell 24% in January after a 3.3% decline in December, mainly due COVID‑19 pandemic. Increasing vaccinations will help the car demand recover; however, the pandemic is still the main drag for an economic comeback.
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Technical analysis: $160 represents a strong resistance level
The important support levels are $150 and $140; $ 160 and $170 represent the resistance levels. If the price jumps above $160, it would be a signal to trade shares, but if the price falls below $150, it would be a strong “sell” signal.
Even in this pandemic environment, Toyota’s business is going well, and shares of this company offer a very good opportunity for long-term investors. Toyota reported better than expected FQ3 results this February; total revenue has increased 7.1% while a net income rose 14%.