BofA Securities has issued a downgrade for Nissan (OTC:NSANY) Motor Co Ltd (7201: JP) (OTC: NSANY), moving its stock rating from Buy to Underperform.
The firm also reduced the price target to JPY370.00 from the previous JPY640.00. The downgrade is attributed to a combination of factors negatively impacting the automaker's prospects.
BofA Securities outlined several reasons for the downgrade, including increased competition in the United States and a worsening sales environment in Europe.
Additionally, there has been little indication of a sales rebound in the Chinese market. The firm also noted that Nissan lacks new models that could potentially drive earnings up to the fiscal year ending March 2027.
Another factor influencing the downgrade is the reduced likelihood of additional share buybacks from Renault (EPA:RENA), which had previously supported the Buy rating.
With these considerations, BofA Securities adjusted their price objective, moving away from a sum-of-the-parts valuation method due to an increased discount for Nissan's automotive business, which they no longer deem appropriate.
The new price target is based on a price-to-book (P/B) ratio, specifically the 0.23x multiple from the fiscal year ending March 2020, which was a period of heightened concern over Nissan's fundamentals. This multiple has been applied to the firm's estimate for Nissan's book value per share for the fiscal year ending March 2025.
InvestingPro Insights
Amid the downgrade from BofA Securities, Nissan Motor Co Ltd (NSANY) presents a mixed financial picture according to InvestingPro data. Nissan's market capitalization stands at a modest $9.88 billion, reflecting investor sentiment and market conditions. The company's Price/Earnings (P/E) ratio, as of the last twelve months leading up to Q1 2023, is attractively low at 3.57, suggesting that the stock may be undervalued relative to its earnings. This is further emphasized by a Price/Book (P/B) ratio of 0.23, indicating that the shares are trading at a significant discount to the company's book value.
InvestingPro Tips highlight some key strategic financial decisions by Nissan's management, such as their aggressive share buyback strategy and a history of raising dividends for three consecutive years. These actions often signal management's confidence in the company's financial health and future prospects. Additionally, the company's liquid assets surpassing short-term obligations suggests a stable financial position in the near term.
For those interested in a more comprehensive analysis, InvestingPro offers additional tips on Nissan, providing a deeper dive into the company's financial health and market performance. For further insights, visit InvestingPro where 15 additional tips are available to guide potential investment decisions.
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