On Thursday, CFRA analyst Aaron Ho downgraded Nissan Motor Co Ltd . (7201:JP) (OTC: OTC:NSANY) stock from Hold to Sell, maintaining a price target of $5.00. The new rating reflects concerns over the company's performance and broader industry challenges. Ho cited a five-year low valuation based on a projected price-to-book ratio of 0.27x for the fiscal year ending March 2025 (FY25).
Nissan's earnings risks stem from both deteriorating company fundamentals and a tough industry environment. CFRA has adjusted its financial forecasts for the automaker, now expecting a loss per share of JPY104 for FY25, a significant downturn from the previously estimated earnings per share (EPS) of JPY120. The firm also revised its FY26 EPS estimate downward to JPY86 from JPY166.
The downgrade follows Nissan's reported earnings for the first half of FY25, which revealed an EPS of JPY10 compared to JPY152 in the same period the previous year. This result fell short of CFRA's expectations, largely due to increased marketing expenses. Revenue also saw a decline, dropping by 1% to JPY6 trillion, attributed to weaker unit sales volume.
Ho expressed concern over Nissan's full-year unit sales, which are expected to remain flat. The analyst pointed to Nissan's outdated model designs and stagnant technological development as factors likely to result in a smaller market share in FY25. The competitive landscape is also expected to intensify, with heavy discounting trends and rising research and development costs as a percentage of revenue adding to the pressure.
The strategic move of merging with Honda (NYSE:HMC) was characterized by Ho as a "desperate measure" with limited material benefits, further justifying the downgrade to a Sell opinion. CFRA's stance indicates skepticism about the merger's potential to substantially improve Nissan's competitive position or financial outlook.
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