Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Honda Motor Company Fell Over 12% in January

By John Rosevear – Feb 1, 2016 at 6:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the Japanese automaker fell in a broad-based selloff of auto stocks in January. But is Honda now a bargain, or is it cheap for good reason?

What: Shares of Honda Motor Company (HMC -1.80%) dropped 12.4% in January, opening the month at $30.86, and closed at $27.02 on January 29.

So what: Honda, along with most of its major global rivals, was caught in a broad sell-off of auto stocks that happened after analysts projected roughly flat growth for the U.S. new-vehicle market in 2016. That, plus growing concerns about a slowdown, or even a recession, in China, led to fears that the current growth cycle for autos might be coming to an end.

Honda is also suffering from the high costs of a series of huge recalls related to defective airbag inflators from longtime supplier Takata. The company has already recalled nearly 25 million vehicles around the world, and the recalls are expected to take a roughly $2.6 billion bite out of its earnings for fiscal 2016.

Now what: Honda's shares have been slumping for much of the last two years. That's only partly because of the Takata recalls: Honda has also been fending off concerns about its sluggish efforts in China and its so-so sales gains here in the United States. 

Still, I'd hesitate to call Honda a buy even at current prices. Its dividend yield is still a relatively meager 2.64%, and its own expectations for sales and profit growth are modest. It's still a strong and healthy competitor, but I think there are better options for investors picking over beaten-up auto stocks right now.

John Rosevear has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Honda Motor Co., Ltd. Stock Quote
Honda Motor Co., Ltd.
HMC
$23.52 (-1.80%) $0.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.