Automakers have been hammered, with the exception of Tesla (NASDAQ:TSLA) now that shares have hit all-time highs. But the rest of the industry has come under extreme pressure. When it comes to Toyota (NYSE:TM), it too has been hit despite its many positives. Despite the selloff though, Toyota stock is down “just” 10.7% from its 52-week high.
While Toyota was caught up in the decline, the stock has actually fared pretty well. Shares fell just 25% from peak to trough, outperforming everything from the S&P 500 (fell 35.4%), to General Motors (NYSE:GM) (fell 64.6% from its one-year high) to Tesla (fell 63.8%).
When Tesla stock ran above $1,000 per share last week, it took the crown as the world’s largest market cap for an automaker. After a quick dip though, Toyota now edges out Tesla, at $176 billion vs. $173 billion.
I really like both of these companies and believe in their long-term future. But it’s very interesting watching the disparity between the two. For instance, Toyota has more than ten times the revenue that Tesla has and churns out tens of billions of dollars in net income. Yet the stocks command the same market cap.
Let’s look at Toyota a little more closely.
Sizing Up Toyota Stock
Despite all sorts of partnerships and different brand ownerships from its competitors, Toyota is still one of the largest auto producers in the world.
Of course, that production will take a hit in 2020 due to economic and pandemic-related issues. In February, March and April, the world was hampered by lockdowns and stay-at-home orders as the novel coronavirus continued its rapid spread.
People couldn’t go out to eat let alone go buy a car. For automakers with fixed costs and running a tight ship in terms of production, this was a massive headache. Inventories bloated as sales were shut off almost overnight. It forced companies like Ford (NYSE:F) and GM to draw down on their credit lines in order to bolster their cash reserves.
Unlike many companies now, automakers have to contend with the potential economic fallout that the lockdowns had on consumers. That’s true domestically and internationally, given the high cost of a new vehicle.
For Toyota, being one of the world’s largest producers is both a blessing and a curse. But on the plus side, it’s a well-run entity. Compared to its peers, it’s not even close.
In the trailing 12 months, Toyota generated $275 billion in sales and $19.1 billion in net income. Among Tesla, Ford, General Motors and Honda Motors (NYSE:HMC), the closest anyone came to those figures is $149 billion in sales (Ford) and $4.87 billion in income (GM).
It doesn’t have the best gross margins — on a trailing basis, both Honda and Tesla top Toyota — but it tops the group on profit margin.
Bottom Line on TM Stock
For as much flack as the auto industry gets, realize Toyota stock is a different breed. It didn’t get hit the way its peers or the broader market did in March and has a superior income statement vs. its peers.
The biggest risk to Toyota remains the coronavirus. If a second wave hampers the economy or forces another series of lockdowns, automakers will come under pressure. While Toyota stock did a solid job — and quite honestly, a shockingly good job — dodging an enormous decline, it too would be at risk for further downside.
That said, it’s handling its business well in the short term. In the long-term, it continues to make strides toward the future of mobility.
Toyota was a pioneer in electric and hybrid vehicle technology. As one of the early “go green” automakers, don’t expect the company to abandon stride now. It should continue to push the envelope in terms of what’s possible under alternative fuel systems.
Further, Toyota’s push in autonomous vehicles hasn’t gone unnoticed either. Its own developments have been solid, while its partnership with what I consider one of the very best in the autonomous driving space should help too. Of course, we’re talking about Nvidia (NASDAQ:NVDA).
Between short- and long-term catalysts, Toyota stock is a clear winner in an uncertain industry.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.