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On Wednesday, Jefferies analyst Nitij Mangal issued a downgrade for Tata Motors Ltd (NSE:TAMO). (TTMT:IN) (NYSE: TTM), moving the stock rating from Buy to Underperform. Alongside this change, the price target was adjusted to INR660.00 from the previous INR930.00. The decision came after a notable period of approximately three and a half years with a Buy rating on the company. The stock, currently trading at $0.26, has shown remarkable resilience with a 110% return over the past year, according to InvestingPro data.
The downgrade was prompted by a weaker-than-expected financial performance in the third quarter, where Tata Motors (NYSE:TTM) saw its EBITDA decline by 16% year-over-year. Additionally, the earnings were 19% below the Jefferies estimate. Mangal pointed to a series of challenges faced by the company, including decreased demand for Jaguar Land Rover (JLR) in the Chinese and European markets, rising customer acquisition costs, and increased warranty expenses. Despite these challenges, InvestingPro data shows the company maintains a GOOD Financial Health Score of 2.73, with a conservative beta of 0.53 and a healthy current ratio of 1.26.
The Indian market, which is significant for Tata Motors, is also showing signs of deceleration in commercial vehicle (CV) and passenger vehicle (PV) demand. Moreover, the competitive landscape is intensifying, particularly in the electric vehicle (EV) sector, which poses further challenges for Tata Motors.
Despite anticipating a seasonally stronger fourth quarter, Jefferies has revised its forecasts for the company’s EBITDA for fiscal years 2025-2027, reducing estimates by 7-11%. Earnings per share (EPS) predictions have also been lowered by 5-10%. These adjustments have influenced the new price target set for Tata Motors shares. For deeper insights into Tata Motors’ valuation and financial health metrics, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 top stocks with expert analysis and actionable intelligence.
In the broader automotive sector, Jefferies maintains Buy ratings for other companies, identifying Mahindra & Mahindra (MM), Eicher Motors (NSE:EICH) (EIM), and TVS Motor Company (NSE:TVSM) (TVSL) as preferred stocks. These firms are expected to fare better in the current market conditions according to Jefferies’ analysis.
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