M&M Shares See Volatile Market Conditions Amid Analyst Optimism
Mahindra & Mahindra (M&M), the renowned passenger vehicle and tractor manufacturer, has seen its share price experience significant volatility recently, marked by sharp corrections and optimistic analyst evaluations.
Over the past two weeks, M&M shares have dropped considerably from their 52-week high, leading to investor concerns. Just last week, the stock saw declines of 9%, following earlier losses of 6%. These fluctuations have been attributed, at least partly, to the potential entry of Tesla, the electric vehicle giant, entering the Indian market and the ensuing questions about the impact on M&M's business prospects.
Despite these challenges, analysts remain bullish on M&M’s stock prospects. Bernstein led the charge, stating, “Bernstein has an 'outperform' rating on the stock with a price target of ₹3,650 per share, implying a potential upside of 37% from the previous closing price.” Bernstein’s note highlighted the company’s adherence to its capital allocation policy, asserting any potential impact from Tesla's India entry is likely already priced in. While Tesla's imported electric vehicles (EVs) would likely target the higher end of the market, Bernstein believes this limits near-term impact.
Sector watchers might find Jefferies’ stance equally encouraging. The brokerage echoed Bernstein’s positivity with its own 'buy' rating and placed M&M’s price target at ₹4,075, which translates to a potential upside of 53% based on Friday's closing prices. Jefferies noted the limited immediate impact from Tesla’s arrival and pointed out M&M's outstanding electric vehicle orders, claiming these orders constitute 30% of India's total EV sales for the upcoming 2024 calendar year.
Investment firms have been drawn to M&M's financial fundamentals, citing attractive valuations. Jefferies also remarked on M&M's core projected price-to-earnings (P/E) ratio of 20 for the fiscal year 2026, alongside their confident estimates of 18% compound annual growth rate (CAGR) for earnings per share (EPS) through FY2025-2027.
Goldman Sachs, another key player among vocal advocates, reiterated their support stating, “The third one to reiterate its positive stance on M&M was Goldman Sachs, with a 'buy' rating and a price target of ₹3,800, which implies a potential upside of 43% for the stock.” They indicated Tesla's prospective entry had led to M&M’s automotive division being undervalued compared to its industry peers, highlighting a 15% discount compared to Maruti Suzuki.
Reflecting over the past decade, Goldman Sachs noted, “M&M has returned a median of 23% and 26% over 12- and 24-month periods, respectively, following episodes of 15% stock price corrections from peak.” This history of recovering from corrections adds to the bullish sentiment surrounding the stock at present.
Currently, the sentiment among analysts is tilted heavily toward optimism; out of 40 analysts covering M&M, 37 have declared 'buy' calls, only two have rated it as 'hold', and just one has issued a 'sell'. Despite the recent downturn, the resilience of M&M appears firmly underpinned.
By the end of Friday’s trading session, M&M shares were down 6.2%, regressing to ₹2,663.5 each, marking its position within the market struggles. A notable observation is M&M shares have been down for 10 out of the last 11 trading sessions, pinpointing the underlying sell pressure.
Trading continued with mixed outcomes; on Monday morning, M&M shares stumbled slightly, losing 1.4% initially but began to recover thereafter, hitting intraday highs around ₹2,712.45.
Investors are advised to keep a close watch on M&M shares as positive trading trends and analyst ratings may present opportunities amid the turbulence. The overall scenario highlights significant potential upside, even as market apprehensions linger about competition from new entrants like Tesla.
We might see how M&M navigates through this phase, potentially turning challenges posed by outside competition onto new growth avenues. Keep monitoring as this tale continues to evolve.