Global brokerage firm Jefferies has revised its price target for Tata Motors to ₹550, down from ₹600, citing multiple headwinds across its domestic and international operations. This downgrade comes after Tata Motors reported a sharp decline in its Q1 FY26 earnings, raising concerns about its near-term performance. The question now is: should investors consider selling?
Jefferies’ Bearish Outlook
Jefferies has maintained an “underperform” rating on Tata Motors, highlighting the following concerns:
- Q1 EBITDA Decline: A 37–41% year-on-year drop in EBITDA and pre-exceptional profit before tax, significantly below estimates.
- EPS Forecast: Estimated 19% decline in FY26 earnings per share, followed by only 8% CAGR over FY26–28.
- Valuation Cut: FY27–28 EPS projections are 12–21% below street consensus, prompting a price target cut to ₹550.
Key Challenges Identified
Jaguar Land Rover (JLR)
- Increased Competition: Rising competition in global markets, especially China.
- Consumption Tax in China: A new 10% luxury tax impacting JLR’s entire portfolio.
- Warranty Costs and BEV Transition: Higher customer acquisition costs and aging models amid the shift to electric vehicles.
- Tariff Impact: Sales in the US, UK, and Europe affected by trade tariffs.
India Operations
- Passenger Vehicles (PV): Market share slipped by 1.2 percentage points to 12.8% in Q1 FY26. Margins weakened with low visibility of recovery.
- Commercial Vehicles (CV): Demand remains subdued. Although margins improved slightly, volumes fell 6% year-on-year.
- Iveco Acquisition: Jefferies remains unconvinced about the strategic value of acquiring Iveco’s commercial trucking business.
Contrasting Views from Other Brokerages
While Jefferies is cautious, other brokerages remain optimistic:
- CLSA: Maintains an “outperform” rating with a target price of ₹805, citing potential upside in the CV segment.
- Macquarie: Also retains an “outperform” rating with a target of ₹753, though it acknowledges near-term risks due to JLR demand uncertainty.
Stock Performance Snapshot
Despite the weak Q1 results, Tata Motors shares showed resilience in early trade on August 11:
- Previous Close: ₹633.30
- Intraday High: ₹653
- Current Price: ₹637.85 (NSE), ₹652 (BSE)
This suggests that the market may have already priced in some of the negative news, or that investors are betting on a longer-term recovery.
Should You Sell?
The decision to sell should depend on your investment horizon and risk appetite:
- Short-Term Investors: May consider trimming exposure if they expect further downside or volatility, especially with Jefferies’ ₹550 target implying a potential 15% drop from current levels.
- Long-Term Investors: Might choose to hold, especially if they believe in Tata Motors’ strategic direction, EV transition, and eventual recovery in JLR volumes.
It’s also worth noting that out of 33 analysts covering the stock, 18 have a “buy” rating, 9 say “hold,” and only 6 recommend “sell.”
Conclusion
Jefferies’ downgrade reflects genuine concerns about Tata Motors’ earnings trajectory and operational challenges. However, the broader analyst community remains divided, with some seeing long-term value in the stock. Investors should weigh the risks against their portfolio goals and consider whether the current price already reflects the worst-case scenario.
Top-notch SEBI registered research analyst
Best SEBI registered Intraday tips provider
Telegram | Facebook | Instagram
Call: +91 9624421555 / +91 9624461555
