Japan's Stock Spotlight: Why Toyota's Stock Performance Has Surpassed Tesla？
Since last year, the Japanese stock market has begun to climb significantly, attracting the attention of global investors. In March, amid the positive news of "Harudou," Japan ended its negative interest rate policy that had lasted for eight years, leading the Nikkei to reach a new high on March 22. As $Toyota Motor (7203.JP)$, the highest-valued Japanese company, also repeatedly hit new highs, it has propelled the Nikkei's gains.
As one of Goldman Sachs' selected "Seven Samurai" of Japan, Toyota's stock performance is in no way inferior to that of the " Magnificent Seven" of the U.S. market. Since 2023, Toyota Motor's U.S. stock has risen over 70% to $241.67, with a total market capitalization of $326 billion.
Toyota Boosted by Weaker Yen and Rising Sales
The devaluation of the Japanese yen has conferred a competitive edge on export-driven firms such as Toyota. Most of Toyota's production costs are denominated in yen, while its overseas sales are calculated in local currencies. Therefore, when the yen depreciates, Toyota's revenue in yen increases, along with profit margins. Additionally, a depreciated yen renders Toyota's offerings more cost-competitive abroad, enhancing their appeal in foreign markets, which can lead to an uptick in sales volume.
A revival in manufacturing and consumer preferences have allowed Toyota to continue seizing the world's highest-selling automaker title. Toyota's global sales last year set a new record at 11.2 million vehicles, a growth of 7.2%.Supply limitations have eased and production has normalized, with the company's output returning to the peak levels experienced in 2019.
Based on Toyota's latest earnings for the first nine months of FY24, the company's sales are mainly in Japan, North America, and Europe. Despite a slump in electric vehicle sales, Toyota's sales in these regions grew by more than 16%. Goldman Sachs notes that the market is reevaluating the potential of hybrid vehicles, an area where Toyota excels.
Toyota Surges While Tesla Encounters Bearish Sentiment
Last year, both $Tesla (TSLA.US)$ and $Toyota Motor (TM.US)$ saw strong stock performances, but entering 2024, the share prices of the two companies are heading in completely different directions. Since 2024, Toyota has seen its share price increase by nearly 32%, while Tesla's stock has fallen by 35%.
In the first half of 2023, Toyota's profit margins exceeded those of Tesla, positioning it to potentially become the world's most profitable automaker once again. Conversely, due to frequent price reductions and a decline in gross margins for four consecutive quarters, several investment bank analysts have voiced negative opinions on Tesla.
On March 25, Mizuho Securities reduced Tesla's stock rating from "Buy" to "Neutral" and cut the target price from $270 to $195, citing a prediction of a continued slowdown in electric vehicle demand until 2025.“While we remain constructive on the broader EV landscape with the long-term trend to electrification, near-term EV demand and tightening liquidity are creating challenges into 2025E,” analysts said.
Morgan Stanley's Adam Jonas attributes the widening gap between electric vehicle companies and traditional automakers to market dynamics. He notes a shift in the American market where mainstream buyers, unlike early adopters, are hesitant to pay more for electric vehicles than for traditional gasoline cars. This shift has favored Toyota, whose slower move to full electrification and focus on hybrids have unexpectedly paid off.
He suggests that if Tesla's share value were to drop by another 30% to the $120 mark, Toyota could reclaim its status as the most valuable automaker in the world. This situation reflects changing consumer tastes and a slowdown in electric vehicle sales across key markets.
Sources: Bloomberg, Investing.com, Company website
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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