TM - Toyota: Durable Goods Recession Points Toward Underperformance (Rating Downgrade)

2024-06-11 17:56:54 ET

Summary

• Toyota's recent safety testing scandal casts a shadow on consumer and investor trust, particularly regarding its solid-state battery claims or the development timeline.
• Macroeconomic data regarding consumer financial stability indicates a more significant decline in durable goods sales.
• Japan's ongoing currency weakness may benefit Toyota, but significant FX volatility can become harmful if it creates supply chain issues.
• Toyota trades at a significant premium to most other car companies that may no longer be justified given its potentially declining prospects.

At the end of last year, I published a neutral outlook on Toyota ( TM ) in " Toyota: Solid State Batteries Will Create A New Electric Vehicle Era ." At that time, I believed the company had a strong long-term outlook mired by short-term cyclical risks. Since then, TM has risen by 12.6% in value but had been up by ~33% before reversing most of those gains....

For further details see: