Tata Motors shares give up Rs 700 mark for first time since Nov 2023; can they bounce back?

Shares of Tata Motors Ltd gave up the Rs 700 mark on a closing basis for the first time since November 2023 today. Tata Motors stock closed 7.37% lower at Rs 697 in the current session after Q3 earnings came below estimates on weak JLR performance. On November 28, 2023, the Tata Motors stock last closed below the Rs 700 level. It ended at Rs 697 in that session. Since then, the Tata Motors stock has ended above the Rs 700 mark. 

Tata Motors stock traded in the red in the current session after brokerages turned bearish and cut their price targets on the auto stock.  

The stock fell to a 52-week low of Rs 684.25 intra day on the back of weak performance by JLR and slowing demand in the China market. Market cap of the Tata Group firm fell to Rs 2.56 lakh crore. With today's correction, the Tata Motors stock has fallen 40% in the last six months. 

JM Financial has a buy call on the stock with a price target of Rs 860. However, it has reduced the target from the earlier Rs 900. 

The brokerage said JLR's margins came below estimates. 

"JLR –margin below estimates: JLR reported revenue of £7.49bn (1.5% YoY, +16% QoQ), 3% below JMfe. Wholesale volume (ex-CJLR) increased 3% YoY to c.104.4k units (+20% QoQ) led by strong growth in North America region. EBITDA margin stood at 14.2% (-200bps YoY and +240bps QoQ), 100bps below JMFe."

"While near-term growth for Domestic CV & PV is expected to be muted, we expect underlying demand environment to improve from FY26 esp. for domestic CV (led by revival in government capex) and domestic PV (led by new launches and favourable base). Maintain BUY with Mar’26 SOTP of INR 860 (standalone / JLR valued at 12x / 2.3x EV/EBIDTA). Recovery in underlying demand remains a key monitorable," said JM Financial. 

Brokerage Motilal Oswal maintained its neutral call on the Tata Motors stock post Q3 earnings. 

"We expect margin pressure to persist at JLR over FY24-27E, given: 1) weak demand in key regions, 2) rising cost pressure as it invests in demand generation, and 3) EV ramp-up, which is likely to be margin-dilutive. Even in India, both CV and PV businesses are seeing a moderation in demand. We cut our EBITDA estimates for Tata Motors (TTMT) by 3%/5% over FY25/FY26 to factor in the weakness in JLR business. For lack of any triggers, we reiterate our Neutral rating with a Dec’26E SoTP-based TP of Rs 755," said the brokerage. 

Meanwhile, global brokerage firm Jefferies downgraded Tata Motors stock to "underperform" from its earlier rating of "buy".  The brokerage also sharply reduced its price target to Rs 660 from Rs 930 earlier.

Its UK arm JLR faces weak demand in China and Europe, along with a rise in customer acquisition costs and higher warranty expenses, Jefferies said adding the Tata Group firm faces a slowdown in demand for both commercial and passenger vehicles. Rising competition in the electric vehicles space act is also a risk for its EV business. 

Q3 profit slipped 22% YoY to Rs 5,451 crore from Rs 7,145 crore in year ago period. A sharp slowdown in its luxury Jaguar-Land Rover business, fall in margins and a cautious demand outlook for key markets like China affected Q3 performance of the  Indian carmaker. 

However, revenue from operations climbed 3% YoY to Rs 1.13 lakh crore. Consolidated EBITDA during the third quarter came in at Rs 15,500 crore. 

The company’s revenue slipped 4.3% year-on-year to Rs 12,400 crore in the passenger vehicle segment but the segment’s EBITDA rose 120 basis points. In the commercial vehicle segment, revenue slipped 8.4% year-on-year to Rs 18,400 crore. 

Brokerage Nuvama Institutional Equities also reduced its price target by 4 percent to Rs 720 and retained its 'reduce' call on Tata Motors.

Nuvama reduced its FY25 EBITDA target for Tata Motors by 4 percent. "We are building in a muted revenue and EBITDA CAGR of 2 percent each over FY25–27. For JLR, we expect volume contraction due to order book exhaustion, discontinuation of ‘Jaguar’ models and subdued demand across regions," Nuvama said.

The firm sees Tata Motors' India commercial vehicle (CV) division to turn in a muted performance (1 percen CAGR) owing to moderate road construction spends and a high base. 

Morgan Stanley retained its 'equal-weight' call on the stock with a price target of Rs 853. The brokerage cited with Tata Motors' reduced FY25 revenue and RoCE (return on capital employed) guidance for JLR. It said Q3 numbers were weaker than expected. 

Brokerage UBS has a "sell" call on Tata Motors with a price target of Rs 760.

UBS said the company's commentary for the fourth quarter is ambitious amid an uncertain financial year 2026 and 2027. China recovery is the key for JLR to deliver 10% EBIT margin in the next financial year. 

In terms of technicals, Tata Motors shares are trading lower than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day moving averages. Tata Motors stock is trading neither in an oversold nor in overbought zone, indicates its RSI of 48. The stock has a one-year beta of 1.2, indicating very high volatility during the period. The Tata Group stock reached a record high of Rs 1,179.05 on July 30, 2024.