S&P Sticks With "Buy" Rating For Toyota Stock

by Edward Niedermeyer

Published: February 2nd, 2010

Toyota Sienna boy band, Boyota from Jennifer Vuong on Vimeo.

Standard & Poors Equity Research [via BNET] says you shouldn’t dump that Toyota stock just yet.

Will the aggressive action of cutting production and recalling so many vehicles scare away potential Toyota buyers, or will consumers think the abundantly cautious response shows a commitment to customer care and quality? We think it is too early to tell, but we believe resilience and global growth of vehicle demand will help TM (Toyota Motors)

You know, until mechanics actually start finding malignant hellspawn demons within Toyota electronic throttle control units. In which case you should invest heavily in law firms. Meanwhile, Toyota is apparently hiring shamans to cleanse their new product of metaphysical infestation by way of bizarre voodoo ceremonies like the one shown above [Hat Tip: Vanity Fair Gay Cars blog].

#HighFinance #PR #Recall #Toyota

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7 of 18 comments

Mfgreen40 on Feb 02, 2010

Like I wrote yesterday, If Toyota wants to know how not to do this properely, they have Detroit for an example.

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Canucknucklehead on Feb 02, 2010

I bought Toyota stock yesterday. It, along with Ford, are the buys of the year. Toyota has strong fundamentals as a company. They are swimming in cash, have excellent retention and some of the best reliability in the business. And yes, four people have been killed in something like 2.2 million cars. How many of those 2.2 million killed themselves driving too fast, while drunk or by eating McVomit's food. That number is in the thousands. But the public at large knows nothing of statistical analysis. You are far more likely to be killed walking across the street to your Toyota. As a comparison 254 people died in Jeep Cherokee fire deaths on a similar number of cars. This means you are 51 times more likely to die in a Jeep than a Toyota. Did this cause a hullabaloo in the media? Nope, and I am sure race was part of the reason. http://blogs.consumerreports.org/cars/2009/10/potential-fire-hazard-may-trigger-recall-of-jeep-grand-cherokees.html

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- Steven02 on Feb 02, 2010
  
  19 deaths have been reported in the US from SUA. It was only the family of 4 that made the news. http://www.latimes.com/business/la-fi-toyota-pedal30-2010jan30,0,4401302.story I am not sure how the comparison matters unless you want people to say that one is bad too. IMHO saying one thing is bad, but this other one is really bad doesn't mean the first case isn't bad.
  
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- ClutchCarGo on Feb 02, 2010
  
  Work the statistics anyway that you want; people still respond to these things emotionally, not logically, and it remains to be seen what the general public's mood towards Toyota will be by the time that this winds down. One really bad bit of timing for Toyota is that February is ratings sweeps month in the US. You can expect every local news team to be scrounging around for a hapless Toyota owner to fearfully describe their own "brush with death" due to SUA. And even tho those news stories will also have a short statement by a happy Toyota owner, the public will get the impression that for every happy owner there's another owner who had this problem, when in fact a very small number of owners have actually experienced any throttle issues at all. Not to mention the number of stations that will do an examination of the pedal mechanisms like that done here on TTAC, only shabby and sensational instead of careful and thoughtful. It's a ratings bonanza!
  
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- Baldheadeddork on Feb 02, 2010
  
  I own some shares in Ford, and I love bargain stocks, but I'm not buying Toyota yet. This is still a very expensive stock. TM's market cap is over 3x Ford, VW, Nissan and Daimler, and more than twice as large as Honda. They have a weak dividend that's been cut three in three consecutive periods and it's in danger because they're not profitable and this gas pedal recall is going to burn a mountain of cash from their reserves. They have already announced that the weak dollar is going to keep them from making a profit in the US in 2010, and sales in Europe are expected to be much lower than 2009 because of the end of buying incentives. Right now analysts are projecting $3.24 EPS for FY2011 (which doesn't begin until March 2010). I expect the currency valuations and the damage already done by the gas pedal recall is going to cause a substantial downgrade in those estimates, and when they are downgraded the share price is going to follow. I also don't know if the market has priced in the cost of this recall and PR nightmare. TM is trading today at ~$78, which is still above it's average price for the last twelve months. And we still don't know if Toyota has really figured out the cause of the unintended acceleration, or if the shim fix is going to work. If they roll this out and another Camry or Avalon flies off a parking deck or into a lake, the bottom is going to fall out. TM is a falling knife. Try to catch it at your peril.
  
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Steven02 on Feb 02, 2010

Surprised no one comment on the boy band. Only mildy better than the Volt dancers.

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Ohsnapback on Feb 02, 2010

S&P is so good at what they do, they had buy ratings on Lehman and Bear Stearns (as well as many other now defunct companies), and AAA+ ratings on bundled residential backed mortgage security CDOs in 2007. In other words, do the opposite of what S&P states, and you'll fare much better statistically. (What does on expect when their business model only generates revenue based on 'buy' ratings, and no revenue on 'sell' ratings).

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