Toyota Motor (TM) Is Unlikely To Return To Peak Earnings Soon
Analyst Ronnie Moas of Standpoint Research downgrades Toyota Motor (NYSE: TM) from "buy" to "hold."
According to Standpoint Research, TM’s shares, which were trading at $91.97 intra-day on January 19, 2010, crashed to $71.00 soon after news of the recall leaked out. “TM has handled the crisis properly, and made the best of a bad situation. That being said, the financial, legal and reputational damage is done and will not be repaired overnight. With an upside from the current quote of 25%-35% over three years and a downside that could send us back down to $71 (or lower) in the near-term, the risk reward is not attractive,” the analyst says.
Standpoint Research mentions that the much-awaited exit point has come, with Toyota Motor’s shares closing on Monday at $77.94, reflecting a 9.8% off from their low and 15.2% off from the high achieved on January 19. “The shares are right about where they should be at this price point especially if you are taking a long-term view. In my opinion, TM will not get back to peak earnings any time soon ($8.75 in 2007 and $10.82 in 2008), but they could get back to where they were in 2005 ($6.57) or 2006 ($7.29) within three years. TM shares could get back to $100-$110 in the next three years, still well below the $135 peak from February, 2007,” the analyst adds.
