Should I buy Toyota shares after Bank of America assigned a buy rating?

By:
on May 23, 2021
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  • Toyota reported that U.S. sales jumped 182% in April
  • Bank of America assigned a buy rating on Toyota
  • The management of the company expects that demand for vehicles will continue to grow

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Toyota Motor Corporation (NYSE: TM) shares have advanced from $139.29 above $163 since the beginning of February 2021, and the current price stands around $161. Toyota’s business is going well, and at the current stock price, this company is fairly valued.

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Fundamental analysis: Toyota reported that U.S. sales jumped 182% in April

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Toyota is a global market leader in sales of hybrid electric vehicles that continues to generate steady revenue and a healthy profit margin. Toyota reported that U.S. sales jumped 182% in April to 239,311 units vs. a consensus of 227,321 units.

According to the report, APV sales have increased more than 500%, SUV sales have risen by 224%, while Pickup sales jumped +49.8%. Another positive news is that European passenger car registrations rose 218.6% last month; still, it is also important to say that this has happened because of last year’s low base of comparison due to COVID-19 restrictions.

Toyota Motor reported 2021 fiscal year results this month, and total revenue has decreased -8.9% Y/Y, which is not bad in this pandemic environment. Total retail vehicle sales were 10.46 million compared to 9.92 million vehicles sold in the 2020 fiscal year, while the net income for the 2021 fiscal year was $20.27 billion ($19.31 billion was in the 2020 fiscal year).

With more deployment of the vaccines, the company’s management expects that demand for vehicles will continue to grow, and they remain very optimistic about the 2022 fiscal year in terms of growth. The company’s outlook remains stable, and Bank of America assigned a buy rating on Toyota after the automaker’s earnings report.

“We feel Toyota is able to pursue its all-tech strategy precisely because it already has plentiful electrification technology and because it has the operating resources to invest in a wide range of areas,” Bank of America reported.

Toyota trades at less than seven times 2021 EBITDA, and with the market capitalization of $224 billion, shares of this company are reasonably valued.

Technical analysis: $165 represents the first resistance level

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Data source: tradingview.com

The critical support levels are $150 and $140; $165 and $170 represent the current resistance levels. If the price jumps above $165 resistance, it would be a signal to trade Toyota shares, and the next target could be around $170.

On the other side, if the price falls below $150, it would be a firm “sell” signal, and the next target could be around $140.

Summary

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Toyota’s business is going well, and the company reported that U.S. sales jumped 182% in April to 239,311 units. The company’s management expects that demand for vehicles will continue to grow, and Bank of America assigned a buy rating on Toyota after the automaker’s 2021 fiscal year earnings report.

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