Toyota Breaks Out As Market Share Grows; Auto Stocks Are Hot Rods

Toyota Breaks Out As Market Share Grows; Auto Stocks Are Hot Rods

Toyota Motors ( TM ) shares are revving up as investors take note of its sales spurt so far in 2017, bucking the overall downtrend in U.S. car sales, with its SUVs and trucks paving the way to growth in market share.

While General Motors ( GM ), Ford Motor ( F ) and Toyota Motor helped lead the sharp rebound in U.S. auto sales last month, it was the Japanese carmaker that outperformed.

It grew September sales to 226,632 new vehicles, up a stellar 15% year over year vs. a 6% gain for the auto industry as a whole. And it has grown sales by nearly 3% in the first nine months of 2017 vs. a 1.8% decline for the overall industry over the same period.

A highlight for Toyota sales has been the RAV4, the brand that pioneered compact crossover SUVs and that has grown sales 20% this year to 312,230 vehicles. Toyota sells roughly 40,000 RAV4s every month, topping sales in a vehicle segment that is red hot with consumers.

“Toyota is benefiting from an all-new, completely redesigned Camry, which hit showrooms in June, well ahead of its chief competitor, the Honda Accord, just now in dealerships,” said Rebecca Lindland, executive analyst for Kelley Blue Book. “The brand is also continuously updating the RAV4, so it’s aging gracefully even in the face of fresher competition in the highly popular crossover segment.”

Toyota stock gapped up 2% to 124.07 on the stock market today , crossing a 121.90 buy point off an extended saucer-with-handle base. Toyota is at its best levels since the end of 2015.

The automaker is now No. 3 in the U.S. in terms of market share year to date, behind GM and Ford, but ahead of Fiat Chrysler ( FCAU ), according to Kelley Blue Book. In September, Toyota had a 15% market share, second only to GM and up from 13.8% in September 2016.

Unlike Toyota Motors, the Detroit Big 3 have all seen sales shrink so far this year, as they execute a planned reduction in fleet and daily rental sales. “Retail sales to consumers are still strong” for domestic carmakers, Lindland pointed out.

IBD’S TAKE: Toyota Motors stock has an IBD Composite Rating  of 71 and General Motor’s is 93, meaning GM has outperformed 93% of stocks in the recent past. Here is a list of stocks, like GM, with Relative Strength lines making new highs .

Notably, Toyota is also performing well in China, the world’s largest auto market. As Chinese auto sales have bounced back in recent months from a slow start to the year, Toyota reported September sales grew nearly 15% in that market.

Its compatriots Honda Motor ( HMC ) and Nissan (NSANY) also did well last month in growing vehicle sales in China, where SUVs are in hot demand, as they are stateside.

In August, Toyota announced it’s buying a 5% stake in smaller Japanese rival Mazda as they jointly build a $1.6 billion U.S. assembly plant and work together on electric vehicles.

Toyota faces many risks, including political risk should the Trump presidency impose large tariffs on parts and vehicles imported into the U.S., Morningstar analyst David Whiston wrote in August. Its bet on hydrogen fuel-cell vehicles could prove costly too, he added, “if they are wrong and the firm needs to catch-up with consumer demand for BEVs (battery electric vehicles).”

Among other auto stocks making notable moves Tuesday, GM gave up 0.2% a day after peaking at 45.43. Shares have vaulted 23% from their Sept. 1 breakout so far.

Ferrari (RACE) added 0.7% to 115.65, rallying for a second straight day on news that a SUV may be coming from the maker of luxury sports cars. Ferrari, which is the top-performing auto stock in 2017, is in a flat base with a 118.20 buy point.

Tesla (TSLA) rose 3.7% to 355.59, bouncing back from Monday’s 3.9% tumble on a report that it is struggling to automate Model 3 production. Late Monday, top auto analyst Adam Jonas of Morgan Stanley said a “key differentiator’ for Tesla will be its network of superchargers, raising his price target to 379.

Tesla retook its 50-day line Tuesday after losing support on Monday.

Honda and Ford shares rose 0.7% while Nissan lost 1 cent.

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