Toyota Motor stock target cut at UBS, shares ‘not at all undervalued’ By Investing.com

UBS lowered its price target for Toyota Motor (NYSE: ) in a note on Thursday, citing declining valuations in the global auto sector. The price target was cut from JPY 3,400 to JPY 2,600 as analysts at UBS adjusted their earnings estimates for the company.

Despite Toyota’s solid earnings, UBS noted that the company’s stock is not clearly undervalued and maintained a Neutral rating.

UBS pointed out that while Toyota’s multi-pronged strategy, including its hybrid electric vehicle (HEV) and plug-in hybrid electric vehicle (PHEV) offerings, should contribute to steady earnings, the overall auto sector faces with challenges.

“Equity performance has declined along with valuations of global auto makers,” UBS said, explaining why it does not see the stock as significantly undervalued despite its recent decline of more than 30 percent from its peak.

The report also addressed the impact of foreign exchange rates on Toyota’s future earnings. UBS revised its currency assumption to 145 JPY/$ from 150 JPY/$ for the second half of the year and noted that a 1% yen appreciation could reduce Toyota’s FY3/26 earnings per share by 1.8 %.

Looking ahead, UBS expects Toyota’s operating profit to remain relatively flat in FY3/26 at ¥4.5 trillion, with an operating margin of 9.2%.

While higher volumes and improved product mix should offset higher selling expenses, the bank says downward pressure from global industry trends remains significant.

In terms of valuation, UBS cut Toyota’s FY3/26 price-to-earnings (PER) ratio to 9x, compared to its previous estimate of 11x.

Despite Toyota’s historical premium to other automakers such as Mercedes-Benz ( OTC: ), which trades at a 5x PER, UBS said, “We do not view the stock as clearly undervalued.”

Overall, the revised price target reflects both currency-related factors and declining valuations of the broader sector.