Tuesday, January 5, 2016

Toyota Japan stock Slows as Investors Show Concern Over Growth (or lack thereof)

Satoru Nihei, writer for the Nikkei Asian Review published a piece about Toyota Japan. Here are some pull quotes and then some brief discussion follows below.

Toyota Motor is expected to notch up another year of bumper profits, but many investors are skeptical about the auto giant's continued growth in the coming years.
The company's Tsutsumi plant in the city of Toyota, Aichi Prefecture, has been running at full tilt to crank out new versions of the Prius since production began in November. While inspecting the plant recently, Toyota CEO Akio Toyoda said, "I will join in (to work on the production line) if necessary," in a pep talk to workers.
 Toyota is currently producing the Prius at a rate of one unit per minute in response to strong demand for the new model, 
The company's solid earnings performance at the moment, however, has not translated into a rise in its market value.
 According to Richard Kaye of the French investment company Comgest, foreign investors are not buying Toyota shares because they are not convinced that the automaker will grow in the next fiscal year onward.
  In fact, Toyota's profit growth is expected to lose steam in the year that begins in April. 
So, a few things about this story.

"Investors" in general, don't always make decisions for the best reasons. So while Toyota is doing great and makes bucketloads of cash, it's the growth of profit, which may be minimal this year, which is "scaring investors". The idea that it needs to grow is, of course, debatable but there it is anyway. It's what drives analysts and all gossip that swirls around the stock market.

There are, throughout the article, little asides that say foreign investors are not secure that Toyota can grow, due a number of things, their approach in emerging markets and the amount of money they are spending on R&D (think the new AI company here in the US).