Toyota to Equal Weight at Morgan Stanley, ‘expectations for next-generation BEV already in the price’

Morgan Stanley downgraded Toyota (NYSE:) to an “Equal weight” rating (from “Overweight”) and increased their 12-month price target on the stock to ¥2,400.00 (from ¥2,200.00) to reflect weaker FX assumptions for USD from ¥135 to ¥140 ($1 = ¥140.61).

Morgan Stanley has raised profit predictions for Japanese OEMs due to the influence of a depreciating and revised price targets. The automotive manufacturing sector is experiencing a gradual recovery as chip supplies improve. In terms of sales, there is a strong demand in the US market, and incentives per vehicle are increasing as expected.

Analysts anticipate that sales and operating profit in the first quarter will remain robust. However, sales volumes in China for Japanese OEMs, predominantly focused on ICE vehicles and HEVs, are facing greater challenges than initially anticipated due to the increasing popularity of local Chinese BEVs and PHEVs.

Morgan Stanley analysts wrote in a note, We review FX assumptions (¥135→¥140 for USD) and increase our profit forecasts and price targets for Japan’s automakers. The sales environment in the US is sound, but with China business struggling there is no major change in our overall volume outlook.”

They added, “We expect 1Q OP to beat consensus as production recovers and marketing incentives in the US are held down. However, upside from improving expectations for next-generation BEVs has diminished, and we downgrade from OW to EW.”

Shares of TM are down 1.62% in premarket trading on Tuesday.