Tata Motors DVR share price forecast: Where next for the automaker?
Tata Motors (TTM) stock is pushing against its resistance levels after 2021 gains. With semiconductor shortages and rising global commodity prices affecting the company’s margins, what factors are shaping Tata Motors share price forecast in 2022?
Tata Motors is an Indian-based car manufacturer with subsidiaries that include Jaguar Land Rover and Tata Daewoo. The group has a market cap close to $20bn and is the third biggest car supplier in India. The company trades on both the New York Stock Exchange (NYSE) and the National Stock Exchange of India (NSE).
Tata Motors stock analysis after strong end to 2021
Tata’s share price ballooned through the last quarter of 2021, with a 47.36% increase on the NYSE over the last three months. The stock rallied from a 15.25% bounce on 7 October 2021 and a 12.90% jump on 12 October 2021 following the release of strong wholesale figures. The share price has increased by 162.38% on the NYSE over the last 12 months, experiencing 6.86% growth in the last five trading days of 2021.
Tata Motor’s share price closed at $33.48 on 3 January 2021, a 4.33% increase over the day that helped the company push on its 52-week high of $35.38. That jump helped the company’s market cap exceed $20bn for the first time since 10 December 2021. The market cap now (5 December) sits at $20.68bn.
A Tata Motors share technical analysis also gives bullish signals. One-day oscillators are relatively strong, with three indicators, including Momentum at 3.17, indicating a ‘buy’. The Relative Strength Index (RSI), at 60.12, remains neutra at the time of writingl. One-month oscillators are also strong following some respite for the stock after October’s heavy gains.
One-day moving averages are placing the stock in a ‘strong buy’ position, with 14 of the 15 indicators giving ‘buy’ signals, including an Exponential Moving Average of 31.87.
Semiconductor shortages and rising prices
Tata Motors has not been exempt from the industry-wide semiconductor shortage that began to grip the global supply chain in 2021.
The company’s Jaguar Land Rover (JLR) subsidiary sold 18.4% fewer cars in the second quarter of 2021 compared with the same period a year ago, which the company primarily blamed on semiconductor shortages.
Competitors like Audi saw deliveries drop by 23.8% in the same time period, while BMW’s sales fell by 12.2%. Daimler, the owner of Mercedes, experienced a 25% fall in unit sales.
The shortage of semiconductors is one aspect of a global supply chain crunch, with the group also blaming commodity price inflation on cuts to their margins. Indeed, according to the latest World Bank data, prices have risen across the board, with aluminium up 55% between Q3 2020 and Q3 2021.
Tata’s participation as a buyer and supplier in multiple markets does little to shield it from price fluctuations, and the group will hope expectant counter-inflationary policies in 2022 don’t overly stifle consumer demand for their vehicles.
Expectations inside Tata are for the semiconductor shortage to continue to cause strain through at least the second half of 2022, with external analysts projecting a longer supply chain crunch. Intel’s CEO, for example, sees the chip shortage to last until the end of 2023, according to an interview with Nikkei Asia.
Subsidiaries remain in demand
Tata Motors’ fortunes are firmly tied to the success of its subsidiaries, in particular JLR and Tata Daewoo.
Looking to the future, demand for JLR vehicles remains strong. In the group’s latest earnings report, the carmaker confirmed orders now stood at a record 125,000. And while supply shortages hit the physical sales of JLR, for Tata Motors’ domestic Indian operation, retail sales increased by 77%.
Tata Motors’ presence in India is one that is likely to be rewarded by sheer scale in the coming years. The group was the third largest passenger vehicle supplier in India in 2021, with a 8.2% market share and 18.6m vehicles were sold.
According to data compiled by the India Brand Equity Foundation (IBEF), Tata Motors saw sales increase, while big-hitters Maruti Suzuki and Hyundai suffered steep declines between October 2020 and October 2021.
As India continues to grow, with the IMF projecting annual GDP growth above 6% through to 2025, increased disposable income among its citizens could increase demand for passenger vehicles over the next decade.
EV in-roads
The group is also one of many established car manufacturers moving into the Electric Vehicle (EV) space.
In the latest Tata Motors stock news, the company announced it was investing $1bn in its EV business through a deal with TPG Rise Climate. The investment will be incorporated into the company with an equity valuation of $9.1bn.
JLR also plans to go fully electric in its sales by 2025. That compares with a 2026 target for Audi, while BMW plans for 50% of its global sales to be EVs by 2030. Recently, investors tended to reward companies with more ambitious EV plans to future-proof their portfolios.
It also appears to be a prudent move in the short term. According to the Society of Motor Manufacturers and Traders (SMMT), the sale of petrol vehicles has fallen by 14.8% in the UK over 2021, and diesel vehicles by 46.9%. Meanwhile, used car prices were up 16.4% in the first nine months of 2021.
Likewise in India, during the first year of the Covid-19 pandemic, used-car sale enquiries rose by 175%.
Latest earnings reveal widening losses
The latest earnings release proved a mixed quarter for the automaker. Strong domestic consumer demand could not fully alleviate global supply chain issues, with the group posting a loss of INR44.41bn and earnings per share (EPS) of -INR1.50. The loss has widened from INR3.14bn in the same period of 2020.
Revenues from Tata’s standalone operations increased by 91%, as wholesale rose by 56.3% on the back of strong domestic demand in India.
Looking at Tata’s subsidiaries, JLR’s latest earnings, released on 1 November 2021, also reflect the impact of those semiconductor shortages. Beyond the fall in physical sales, revenue fell by 11.1%, contributing to a pre-tax loss of £302m, while free cash flow went from positive £463m in Q2 2020 to negative £664m.
Unit sales for JLR were most heavily hit in Europe and the UK, falling by 20% and 30% respectively.
Tata Motors (TTM) stock forecast
Generally favourable Tata Motors stock predictions tend to support technical indicators that suggest the stock could continue to grow in the short-term.
While not providing any specific price targets, data compiled by Marketbeat indicates a neutral sentiment for the stock, with five analyst ratings keeping the stock in a ‘hold’ position.
This included a recent hold placement by Bank of America, leaving the stock in a neutral positioт, and a push into ‘overweight’ territory by Morgan Stanley on 7 October 2021.
According to Tata Motors price targets comprising 32 analysts’ outlooks, compiled by CNN Business, the stock has a potential upside to an average price target of $36.98. In December, 22 of the 32 analysts rated the stock as a ‘buy’.
On the National Stock Exchange of India (NSE), Emkay Global has provided a Tata Motors share price forecast of INR550, against the 477.4 base at time of reporting in late December.
Wallet investor offers an algorithm-based Tata Motors stock forecast for the next five years for the stock’s placement on the NSE. It projects a closing price of IRN583.714 in December 2022 – a potential 19.3% upside on its latest closing price – while projecting a closing price of IRN720.432 in December 2025 – a 47.2% upside.
AI Pickup carry a prediction for the Tata Motors share price in 2030 on the NYSE, projecting the stock to hit $32.80, a more subdued upside of 2.2%.
Note that predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.
FAQs
Will Tata Motors share price go up or down?
According to Tata Motors price targets comprising 32 analysts’ outlooks, compiled by CNN Business, the stock has a potential upside to an average price target of $36.98. In December, 22 of the 32 analysts rated the stock as a ‘buy’.
Note that analyst predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.
Is Tata Motors a good buy for the long term?
Tata Motors could be a long-term buy on the NSE based on Wallet Investor’s algorithm-based forecast, with a potential upside of nearly 50%.
Note that predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.