Tata Motors Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of India's largest automaker, Tata Motors (NYSE: TTM  ) , jammed on the gas and bolted ahead as much as 13% in intraday trading, as investors reveled in the company's earnings report.

So what: Profit of just more than $500 million on revenue of roughly $6.5 billion beat analysts' estimates, as the automaker benefitted from a strong sales environment. Revenue jumped 37% from a year ago, while the bottom line saw a 10-fold increase. The company noted in particular that its Jaguar and Land Rover lines -- purchased from Ford (NYSE: F  ) for $2.3 billion in 2008 -- have started to turn around; the unit posted a $384 million profit.

Now what: Even investors with little interest in foreign investments are likely familiar with the growthy expectations for India, which is part of the well-known BRIC quartet. That is a major tailwind behind a company like Tata, even if it still has to tangle with foreign competitors. Looking ahead, the good times on the India auto front may continue into the fourth quarter. The Wall Street Journal reported today that Indian auto sales in October were hopping, as new models and low borrowing costs enticed buyers. October sales totaled 182,992, up 38% from a year ago.

Want to keep up to date on Tata Motors? Add it to your watchlist here by clicking here.

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Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy assures you no Wookiees were harmed in the making of this article.


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Comments from our Foolish Readers

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  • Report this Comment On November 11, 2010, at 12:10 PM, PeyDaFool wrote:

    Matt, I respect you immensely as a MF author, but these "what you need to know" columns don't pay your literary skills any justice.

    I really feel these articles can usually be summed up in one short sentence. This is how I would have approached this article:

    "Tata Motors Shares Popped: What You Need to Know... Tata's shares rose roughly 12% today. This is what you need to know: Sell your TTM because the stock is bound to drop 5% plus tomorrow after having such an unjustified run up today."

    I know the MF doesn't condone "day trading," but the underlying fundamentals of the business did not change and the massive increase in price was not justified.

  • Report this Comment On November 11, 2010, at 2:37 PM, TMFKopp wrote:

    @PeyDaFool

    Thanks... (I think?)...

    So you've got my curiosity now... why is it that you don't think the earnings announcement changed the picture for Tata at all?

    Matt

  • Report this Comment On November 11, 2010, at 3:32 PM, PeyDaFool wrote:

    Matt,

    I really didn't mean that as a backhanded complement. I do like your articles; I'm just not particularly a fan of the "what you need to know" series.

    In my humble opinion, I think the earnings announcement was a very positive step in the right direction for TTM. Do I think it warranted a 12% jump in trading? No, I think that was a bit overdone which is why I sold a portion of my shares just before the market closed yesterday.

    As a shareholder who bought in at around $11.50, I'm extremely happy with the way TTM has been performing over the past year and a half. I think they've make incredible strides and I have a positive outlook for the future with their line, as well as the Jaguar and Land Rover line. However, with that said, anytime I see such a rapid rise in share prices, regardless of the earnings or financial information reported at quarterly intervals, I tend to become a bit nervous and seriously contemplate selling because of unrealistic expectations from investors.

    Keep up the good work, Matt and give these "what you know" series articles to a more junior MF writer. Let's get you back to writing more interesting opinion-based articles that have earned the respect of your readers.

  • Report this Comment On November 11, 2010, at 5:10 PM, TMFKopp wrote:

    @PeyDaFool

    Then, thanks!

    "However, with that said, anytime I see such a rapid rise in share prices, regardless of the earnings or financial information reported at quarterly intervals, I tend to become a bit nervous and seriously contemplate selling because of unrealistic expectations from investors."

    That's very fair and I tend to have the same reaction. The aim of these articles though (though I do recognize that you're not a fan) is more to explain relatively quickly why the shares are moving the way they are rather then to give a "buy" or "sell" call (though I do mix that in sometimes).

    And don't worry, I'm still working on other articles as well. These just posted today:

    http://www.fool.com/investing/general/2010/11/11/4-steps-to-...

    http://www.fool.com/investing/general/2010/11/11/the-weekly-...

    The latter article actually highlights the reason why I like doing these quick-take articles -- it was covering the slump in AIZ that made me dig in further to write the more in-depth coverage.

    However, I definitely appreciate the feedback. If you have any thoughts on what might make these quick-fire articles more interesting to you, I'd be very interested to hear it.

    Matt

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