Is Honda Stock A Buy As Motorcycle Business Shines?

HMC: Honda Motor logo
Honda Motor

Honda Motor stock (NYSE: HMC) has gained 7.5% over the last month, marginally outperforming the broader S&P 500 which was up by about 5% over the same period.  Honda posted a stronger-than-anticipated set of Q2 FY’23 results earlier this month (fiscal year ends in March), as motorcycle shipments jumped almost 25% versus last year, although the automobile business saw a decrease in unit sales due to the impact of the semiconductor shortage. Overall, Honda’s revenues rose by 25% year-over-year to 4255.7 billion yen (about $30 billion), and net income came in at 189.2 billion yen ($1.33 billion) for the quarter. The company also revised its guidance for FY’23 upwards, indicating that revenue could stand at about 17,400 billion yen ($122 billion), up from prior guidance of 16,750 billion yen ($118 billion). Operating profits guidance was also raised by close to 5%. The upward revision is due to stronger anticipated motorcycle unit sales in regions including India and Vietnam, and also due to the impact of the weak Japanese yen.

However, now that HMC stock has seen a gain of 7.5% over the last month, will it continue to rally in the near term, or is a decline imminent? Going by historical performance, there is a roughly equal chance of a rise or decline in HMC stock over the next monthOut of 281 instances in the last 10 years that HMC stock saw a twenty-one-day rise of 7.5% or more, 138 of them resulted in the stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 138 out of 281, or about a 49% chance of a rise in HMC stock over the coming month, implying that the stock may not be a particularly attractive buy for the near term. See our analysis on Honda Chance of A Rise for more details.

Calculation of ’Event Probability’ and ’Chance of Rise’ using last ten years’ data

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

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Returns Nov 2022
MTD [1]
YTD [1]
Total [2]
 HMC Return 4% -17% -19%
 S&P 500 Return 2% -17% 76%
 Trefis Multi-Strategy Portfolio 2% -21% 213%

[1] Month-to-date and year-to-date as of 11/22/2022
[2] Cumulative total returns since the end of 2016

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