Toyota's (TM) stock price suffered an 8% drop following their recall fiasco. However, a sudden 4% increase may seem puzzling at first glance. Don't be fooled. The increase is merely because of Toyota's impressive earnings results. The Japanese car maker had strong growth in sales, and raised their net profit forecast through March 2010. This along with an attractive bargain price resulting from the earlier 8% drop caused a flood of buy orders. Thus, Toyota's stock price has spiked...for now. If you're invested in Toyota, it's important to look at how the company is handling the current recall situation, and try to forecast their future. Do they have enough cash to come back? What is their marketing strategy to keep customers loyal to their brand? With US car makers slowly coming back into play, the Toyota recalls might generate some strategy. Ford and GM should beef up their marketing to gain some bright exposure.
In sum, Toyota's stock gain should not be your decision to buy in. Expect further declines until they are on the verge of a comeback. On the flip side, this might be a good entry point for those who have done their financial research and are confident in Toyota's long term success. They are in better financial shape than Ford and GM, and can handle the recall situation. However, if they do not meet their higher net profit goals by March 2010 as fore casted in their earnings call, their stock price will suffer. Toyota, you have one month to get it together.
*chart provided by Bloomberg*
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