By Brian O’Connell
“Toyota’s in-line earnings announcement on Nov. 6 shows that the company is still very well-positioned in terms of scale and being one of the low-cost producers in the auto industry,” says Daniel Lugasi, a portfolio manager at VL Capital Management in Winter Park, Florida. “The company continues to return cash to shareholders with a $42 million share buyback announced. In the U.S., the company suggested a reduction of incentives, which points to the company forecasting positive sales trends in the second half of the year.”
Lugasi says that while he’s cautious on the global auto sector, in general, he’s bullish on Toyota. “The record growth in global autos over the past several years cannot continue forever and with interest rates in the U.S. creeping up, it could have a dampening effect on auto financing volume going forward,” he says. “What really gets us excited about Toyota stock is the potential benefits that will come from the transformation of the global auto industry.” In particular, a joint venture announced in October by Toyota and Softbank to develop a self-driving car service is a “huge step” toward shaping the future of the auto business, Lugasi says.
“Additionally, the joint venture gives Toyota access to Softbank’s portfolio companies that are overwhelmingly focused on technology,” he says. “Joint ventures, such as this one, are very forward-thinking and will likely lead Toyota to be first to market with a successful autonomous vehicle service.” So while Lugasi remains somewhat cautious on the prospects for the global auto industry going onto 2019, given the rapid rate of growth over the past few years, he’s all in on Toyota stock. “We are bullish of Toyota given the steps they are taking to become a major player in the mobility-as-a-service industry,” he says.