Investment Thesis: The CX-60 and CX-70 models may have positive sales prospects, which might act as a catalyst for further appreciation. The company’s cash position is also rising.
Major Japanese carmaker Mazda Motor Corporation (TYO:7261) sells vehicles all over the world, with half of the net sales in the most recent quarter occurring in the Japanese market and the other half in international markets.
Despite difficult socioeconomic conditions, the stock has fortunately continued to rise in 2022. This article aims to assess if Mazda Motor Corporation’s current performance and the longer-term business forecast indicate that it could continue to experience growth.
Considering factors like; cash standpoint, net sales, and potential valuation relative to earnings, the company is well-positioned for potential upside if profits growth continues from here because it appears to be trading at an appealing value relative to earnings.
There is a chance that the company could experience some short-term pressure on sales due to consumers possibly delaying automobile purchases until the overall economic environment becomes more stable, especially as we move into the second half of this year. At this time, inflation and higher fuel prices are significant concerns for the world economy.
The company’s domestic sales account for half of its total sales, which might be advantageous to Mazda (TYO:7261) in the short to medium term. In contrast to its Western counterparts, the Bank of Japan has a less stringent monetary policy, which could encourage Japanese consumers to continue buying cars while credit costs are still low. This is because the Bank of Japan keeps interest rates low while the Federal Reserve and ECB raise rates to fight inflation.
However, the effects of a weak yen might turn out to be a double-edged sword because a lower currency could raise the cost of production by making it more expensive to source resources from outside. Due to production difficulties, Mazda (TYO:7261) may struggle to meet current demand given these factors, along with supply chain bottlenecks that have been worsened by earlier COVID-19 lockdowns in China and the ongoing situation in Ukraine.
This is Mazda’s first plug-in hybrid vehicle; the CX-60 is now being produced and sold in Europe, Japan, and other regions. The CX-70 will soon be available in North America.
Despite the fact that the company will inevitably face more competition from brands like Tesla (NASDAQ:TSLA) and Ford (NYSE:F) Motor Company (F), which have more firmly cemented themselves inside the U.S. electric vehicle market, this may still represent a good chance for Mazda (TYO:7261) to capture a piece of this expanding market. A rising number of consumers are looking to make a gradual shift, and with 5 % of U.S. vehicle sales now being totally electric, it is predicted that demand for hybrid models will rise further.
With the hybrid option, the CX-60 and CX-70 models could significantly increase global sales, which could be a positive development.
In conclusion, Mazda Motor Corporation has demonstrated excellent sales growth and cash performance despite a challenging macroeconomic climate. Despite the possibility of severe macroeconomic challenges shortly, I believe that the stock could continue to rise over the long run from here.
Featured Image: Megapixl @Krasnevsky