Bear of the Day: Toyota Motor (TM)

Toyota Motor Company OverviewZacks Rank #5 stock Toyota Motor (TM) is one of the leading automakers in the world in terms of revenue and production volume. Founded in 1973, the Japan-based Toyota Motor Corporation offers a broad product portfolio, with a full range of vehicles, including cars, minivans, and trucks. Though roughly half of Toyota’s revenue is still derived from internal combustion vehicles, the company has carved out a broad niche with its hybrid cars, which comprise nearly 48% of sales. Toyota is an international business with large footprints in the domestic Japanese market, North America, Europe, and Asia.Toyota: Caught Between the US/Japan Trade WarUS President Donald Trump has warned trading partners to make a deal with the United States before the July 9th deadline or face steep ‘Liberation Day’ - Esque tariff hikes. While the US has announced trade deals with China, the UK, and Vietnam, trade tensions rhetoric between the US and China has escalated recently. Currently, Japan faces 10% tariffs from the US during a 90-day pause period. However, if Japan does not agree to a deal with the US, Trump has threatened tariff hikes to come to a more “fair” trade agreement. At the heart of Trump’s argument is his discontent with the automotive trade imbalance, where Japan sells thousands of cars in the United States and does not allow the US to sell cars to Japan. Unfortunately for Toyota investors, the company is stuck in the middle of an escalating trade war.Tariffs Crush Toyota’s Profit MarginsToyota is suffering a 20.8% contraction in year-over-year profit margins as material prices and US-imposed tariffs take their toll on the company.Image Source: Zacks Investment ResearchWith the Trump tariff deadline looming, the potential for tariff-induced price hikes is a signficant uncertainty for the company.Toyota Exbibits Relative Price WeaknessTM shares are rangebound, trading below the 200-day moving average, and are underperforming the S&P 500 Index significantly. In my experience, weakness begets weakness, and with TM down 15% over the past year, the stock is likely dead money for the moment.Image Source: Zacks Investment ResearchBottom LineWhile Toyota remains a global automotive powerhouse, the looming July 9th tariff deadline and President Trump’s aggressive tariffs threaten Toyota’s profit margins, which are already contracting.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Toyota Motor Corporation (TM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks