On Monday, UBS issued a revised price target for Mazda Motor Corp (OTC:MZDAY) (7261:JP) (OTC: MZDAF), lowering it to ¥900 from the previous ¥1,000, while sustaining a Sell rating on the stock. The adjustment reflects UBS's expectation of a downturn in the automaker's earnings per share (EPS) due to several market challenges.
The firm anticipates a 19% reduction in Mazda's EPS for the fiscal year ending March 2025 and an 11% decrease for the fiscal year ending March 2026. This forecast is based on several factors, including sluggish sales in Japan, Europe, and Asia, as well as heightened competition in the United States.
UBS predicts a continued increase in incentives for larger vehicles in the U.S. market due to the overall intensified competition. Additionally, the firm expects weaker sales in Europe, Japan, and the Association of Southeast Asian Nations (ASEAN) because of an aging passenger vehicle lineup.
The firm also forecasts a significant 25% year-over-year fall in Mazda's operating profit for the fiscal year ending March 2026, which is a more considerable drop than the single-digit decline anticipated by the market consensus. This outlook is maintained alongside the Sell rating for Mazda's shares.
In terms of currency impact, UBS calculates that a 1% depreciation of the yen could potentially increase Mazda's EPS for the fiscal year ending March 2026 by 7.9%, assuming all other factors remain constant. This currency sensitivity analysis highlights the potential effects of exchange rate fluctuations on the company's financial performance.
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