Japanese car makers get a downgrade


The global auto trade has been under pressure for a number of reasons and today's news makes it worth updating our outlook here. For one thing, GM ( quote ) is facing headwinds related to the warrants bond holders received -- this could create an extra 25% worth of this stock's market cap hitting the market soon. For another, Chinese auto sales for March came in only 5.4% above February's already less-than-inspiring growth. Combined with tepid Indian car sales and news that Tata ( TTM , quote ) has pulled back some production, and it does not look completely rosy in emerging markets. But today's big catalyst is probably a somewhat tardy downgrade from Citigroup on the entire Japanese auto sector. Citi now suspects that supply disruptions from last month's earthquake will hurt Toyota ( TM , quote ), Honda ( HMC , quote ) and Nissan ( NSANY , quote ) more than the markets now suspect -- and as a result, analyst Noriyuki Matsushima cut his rating on these stocks all the way from "buy" to "sell." Whether these world-class companies end up reporting record losses for the current period -- as Matsushima now suspects -- or not, there may be opportunities here for an upside surprise elsewhere in the sector. For example, luxury cars are still doing extremely well in China. Good for TTM's Jaguar Land Rover and other high-end brands.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , International , Stocks

Referenced Stocks: GM , HMC , NSANY , TM , TTM

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