Honda Stock Faces Downside on EV Losses: Morgan Stanley

Morgan Stanley Projects Negative Outlook for Honda

Morgan Stanley has signaled a bearish short-term outlook for Honda Motor Co. stock, citing larger-than-anticipated losses in the electric vehicle sector and revised corporate guidance. The investment bank anticipates the stock will underperform the country index over the next 15 days.

Financial Overview of EV Losses

Honda revealed additional EV-related losses totaling up to ¥2.5 trillion, which includes a significant cash outflow of approximately ¥1.7 trillion. Despite these figures, the automaker plans to maintain its fiscal 2026 dividend at ¥70 per share and aims to hold this level for fiscal 2027, which may offer some support to the share price.

Market Impact Analysis

The disclosure of substantial EV losses is expected to exert downward pressure on Honda's share price in the immediate future. Morgan Stanley assigns a 70% to 80% probability to this scenario. While the stable dividend provides a potential floor, the lowered forecasts remain the primary driver for the negative sentiment.

Short-Term Pressure Expected

Investors will closely monitor Honda's ability to manage its EV transition costs. The market's reaction will likely depend on future guidance and strategies to mitigate these substantial losses while navigating a competitive automotive landscape.

FAQ

Q: Why does Morgan Stanley have a negative outlook on Honda stock?
A: The negative view is primarily due to Honda's larger-than-expected EV-related losses of up to ¥2.5 trillion and its lowered financial guidance.

Q: What is supporting Honda's stock price?
A: The company's commitment to maintaining a dividend of ¥70 per share for fiscal years 2026 and 2027 is expected to provide some downside support for the stock.

Source: Investing.com