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Soft Market Holds Nissan Back
Nissan Motor Company (NSANY - Analyst Report) has been accelerating its growth and increasing market share with the aid of several successful product launches. The company has various new launches planned for the current fiscal year. The current Nissan Value-Up plan targets sales of 4.2 million units by fiscal 2009 and a minimum of 20% return on invested capital. However, there are concerns about launch costs and the rise of commodity prices.
The overall automotive industry environment is a challenging one, with volumes going down. Currently, Nissan is trading at a P/E multiple of 8x our 2008 EPADR estimate of $2.17. As Nissan has a zero net automotive debt, its fundamentals appear solid. However, we maintain our Hold rating, as the company faces a continued challenging environment characterized by higher incentives, higher commodity prices, and raw material shortages. Additionally, the proposed launch of new vehicles in North America will raise the risk of incentive growth.
Although foreign automakers have been gaining market share in the U.S., they should also expect to see more competition from U.S. automakers, who are continuing to rationalize plant capacity. Also, Nissan will be required to spend significantly on its new product launches, to gain more market share in the face of stiff competition.
Keeping the above factors in mind, we believe the stock can move a notch up to trade at a higher P/E multiple of 8.3x 2008 earnings. Thus, we have estimated our six-month target price at $18.
Read the full analyst report on NSANY.
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| Market Summary | Sep 02, 2010 21:16 pm ET |
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