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Investing.com - Goldman Sachs has reiterated its Buy rating on Toyota Motor (7203:JP) (NYSE:TM) with a price target of JPY3,500.00, according to a research note released Wednesday.
The investment bank’s analysis focuses on Toyota’s ambitious transformation into a mobility company with a long-term return on equity (ROE) target of 20%, a level Goldman Sachs notes has never been achieved by any traditional automaker.
Goldman Sachs identifies three potential drivers that could improve Toyota’s operating margin and boost ROE: expanded sales of hybrid electric vehicles (HEVs) adding 2 percentage points, cost reduction through Area35 adding another 2 percentage points, and monetization of the value chain including software-defined vehicles (SDVs) contributing 3 percentage points.
The research note indicates that monetizing the value chain represents the most challenging task among these drivers, while suggesting that appropriate management of shareholders’ equity through increased shareholder returns could further support higher ROE.
Goldman Sachs calculates that if Toyota approaches the firm’s Blue Sky Scenario ROE improvements by fiscal year 2036, the theoretical value per share could reach JPY4,700, representing 34% above their current target price and suggesting 62% upside from the current stock price.
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