Is Honda Stock a buy while the motorcycle business shines?

November 22, 2022 by
The Trefis team

Honda engine stock (NYSE: HMC) has gained 7.5% over the past month, slightly outperforming the broader S&P 500, which is up around 5% over the same period. Honda released a stronger-than-expected second quarter FY23 earnings package earlier this month (fiscal year ends March), as motorcycle deliveries jumped nearly 25% from the previous year. last year, although the automotive sector saw a decline in unit sales due to the impact of the shortage of semiconductors. Overall, Honda’s revenue rose 25% year-on-year to 4,255.7 billion yen (about $30 billion), and net profit was 189, 2 billion yen ($1.33 billion) for the quarter. The company also revised up its forecast for FY23, saying revenue could be around 17.4 trillion yen ($122 billion), up from a previous forecast of 16.75 trillion yen. yen ($118 billion). The operating profit forecast was also raised by almost 5%. The upward revision is due to higher expected motorcycle sales in regions such as India and Vietnam, as well as the impact of the weaker Japanese yen.

However, now that HMC stock has posted a 7.5% gain over the past month, will it continue to rally in the near term, or is a decline imminent? Based on historical performance, there are a roughly equal chance of HMC stock rising or falling over the next month. Out of 281 instances over the past 10 years, HMC stock has seen a 21-day rise of 7.5% or more, 138 of them caused the stock to rise during the next month period (twenty-one trading days). This historical pattern reflects 138 out of 281, or around 49% chance of a rise in HMC stock in the coming month, implying that the stock may not be a particularly attractive short-term buy. See our analysis on Honda climb chance for more details.

Calculation of “probability of event” and “chance of upside” using data from the last ten years

  • After moving 0.2% or more over five days, the stock rose over the next five days 47% of the times.
  • After moving 1% or more in ten days, the stock rose over the next ten days 44% of the times.
  • After moving 7.5% or more over a twenty-one day period, the stock rose over the next twenty-one days 49% of the times.

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