Is Toyota Motor a Promising Long-Term Investment?

PHOTO CREDIT: Toyota Motor

OVERVIEW

Toyota Motor Corporation designs, manufactures, and sells motor vehicles around the world. They operate under the Toyota brand, where they produce cars like the Tundra and Corolla, Lexus, Subaru, Daihatsu, and many more. The company also offers financial services to their customers when they purchase vehicles from them.

Why You Should?

  1. Toyota will benefit from a strengthening economy. As people look to upgrade their cars, buy new cars, and as governments look to slow the impacts of climate change, Toyota will see a spike in demand for their hybrid and other clean energy vehicles across all their brands. This will benefit the company in the future.
  2. Toyota offers products for all kinds of consumers. They offer the Toyota and Daihatsu branded cars for people who need an economical and consistent way to get from Point A to Point B. They offer Lexus and Subaru brands to consumers who look for more luxurious and powerful products. This wide range of products has made them one of the largest auto manufacturers in the world.
  3. Toyota sells its products in over 170 countries. This has allowed them to strongly develop and increase their market share in these countries and further increase their reach. This along with the wide range of products that they sell have made them one of the world's largest auto manufacturers. This will benefit their long-term growth goals.
  4. Toyota has seen rising revenues and profits over the past couple of financial years due to the reasons mentioned above. This helps it build a stronger balance sheet and help them grow to achieve their long term growth goals. In the financial year of 2019, the company reported revenues of around 275.3 billion and profits of around 23.3 billion. They reported higher revenues in 2019 at 289.1 billion but lower profits of around 17.98 billion dollars.
PHOTO CREDIT: Yahoo Finance (GRAPH IN JAPANESE YEN)

Why You Should Not?

  1. Toyota’s fuel and hybrid models have stiff competition from companies like Volkswagen, General Motors, and Ford. They are getting crushed by Tesla in the EV space as they have not a good option out for the public and don’t offer key things like infrastructure to have a rapid spread of their EV cars.
  2. The COVID-19 Pandemic has harmed the sales of vehicles all over the world. Sales numbers for Toyota were down double digits for the quarter. This might harm their future growth as they are taking on more debt and weakening their balance sheet.
  3. Toyota has been negatively impacted due to trade tensions. The current administration has increased the price of raw materials to make cars as well as an increase in import fees for foreign-made cars. This will increase operating costs and prices and will negatively be impacted due to these tensions.
  4. Toyota is currently experimenting with Hydrogen technology and other technologies while companies like Tesla and NIO are crushing it. If Toyota does not start to provide cheap and high-quality EV products, Toyota will see slowing sales growth and other metrics decrease as consumers and governments look to take on the impacts of climate change.

MY OPINION

In my opinion, I think that Toyota might be a good investment if it can produce a good EV product that is available to most of its consumers and if they can recover from the COVID-19 Pandemic and trade tensions. If they can, they can use their immense size and wide range of products to continue delivering revenues and profits, which will benefit shareholders.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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