Tata Motors' shares hit 14-month low: Is the worst over?
What's the story
Tata Motors, one of the leading global automobile manufacturers, is currently facing a major crash in its share value.
The company's stock has been on a losing streak for six months in a row, hitting a 14-month low of ₹667 per share today.
This is a massive 42% drop from its all-time high of ₹1,176 per share in July 2024.
Market impact
Market capitalization takes a hit
The steep fall in Tata Motors' share price has led to huge losses for retail investors, who held a 21.9% stake in the company at the end of December 2024.
The company's market capitalization has also taken a hit, with ₹1.8 lakh crore being wiped off, bringing it down from ₹4.32 lakh crore to its current level of ₹2.52 lakh crore.
Performance review
Disappointing Q3 results and market challenges
Tata Motors' disappointing December quarter results, which fell short of estimates, have triggered further sell-off in the stock.
The company's net profit for Q3 FY25 was down by 22.5% to ₹5,578 crore from ₹7,415 crore.
Revenue saw a marginal increase of 2.7% to ₹1.13 lakh crore during this period.
Weak Jaguar and Land Rover (JLR) performance and decline in commercial vehicle sales have contributed to these results.
Guidance revision
Tata Motors revises FY25 JLR revenue guidance
In view of the challenges in key markets, Tata Motors has marginally reduced its FY25 JLR revenue guidance to £29 billion from £29.5 billion earlier.
The company's CV and passenger vehicle (PV) businesses in India witnessed improved margins due to PLI accruals.
However, brokerage firm Motilal Oswal predicts margin pressure to persist at JLR over FY24-27 due to weak demand in key regions and rising cost pressures from investments in demand generation and an EV ramp-up.
Market forecast
Brokerage firms adjust ratings and target prices
Motilal Oswal has cut its EBITDA estimates by 3% and 5% for FY25 and FY26, respectively, owing to JLR's weakness.
The firm continues to maintain a 'Neutral' rating on the stock with a target price of ₹775 per share.
Jefferies India, which maintained a 'buy' rating for 3.5 years, downgraded Tata Motors to 'Underperform' and slashed its target price to ₹660 per share after the company's Q3FY25 numbers missed their estimates.