What’s Happening With Honda Stock?

Japan’s second-largest automaker, Honda Motor stock (NYSE: HMC), has largely moved sideways this year, returning about 2% since early January. Honda’s recent performance has been somewhat weak in the recent quarters. Over Q4 FY’25 (ended March 31), the company’s revenues missed estimates, coming in at about $35.1 billion, down from the year-ago figure of $36.5 billion, while earnings also fell short.  While Honda’s motorcycle business has seen strong growth led by demand from Asian markets, its automobile business saw a drop in revenue amid headwinds in China. In North America, the company sold 1.65 million vehicles in FY’25, a slight uptick from the previous year, supported by stronger uptake of hybrid vehicles.

However, the 25% tariff on foreign automobile imports by the Trump Administration is likely to impact Honda’s U.S. business. Honda is looking to work around these tariffs, with reports indicating that it could manufacture its next-generation Civic hybrid, one of its most popular models, in the U.S., instead of Mexico. Honda has indicated that the impact of the tariffs imposed by the U.S. would be material to its business, with the situation also remaining fluid due to the frequent revisions in policy. Honda has guided net profit projections for 2026 coming in at 70.1% lower compared to FY’25, while revenues are projected to slip 6.4% year-over-year.

Is Honda Stock Still Attractive?

Investors are also likely concerned about Honda’s longer-term prospects. Honda doubled down on its EV strategy, boosting investments into EVs when demand is cooling and this is likely to weigh on profitability in the near term. It also remains to be seen if Honda can remain competitive in markets such as China, where local producers are seeing a surge in demand for their low-priced but very well-specced electrified vehicles. Moreover, Chinese-made vehicles are increasingly accepted globally, with China poised to become the world’s largest car exporter, overtaking Japan. Honda’s volumes in Asia declined by almost 28% year-over-year in FY’25. Besides this, the potential strengthening of the yen could also hurt Honda in the medium term. The yen has gained close to 8% versus the dollar over the last 12 months.

A stronger yen reduces the competitiveness of Honda’s exports from Japan and reduces its overseas earnings when translated back to yen.  That being said, Honda’s stock valuation looks reasonable, trading at about 8x FY’25 earnings. The company’s low valuation, continued share buybacks, and potential growth in the hybrid space could help to support the stock through the current turmoil. We value Honda stock at about $32 per share, marginally ahead of the current market price. See our analysis of Honda Valuation for more details on what’s driving our valuation for Honda. Also, see our analysis of Honda Revenue for more details on Honda’s key revenue streams.

While Honda stock is facing risks from trade tensions and a shifting Asian market, investors might want to consider diversified approaches, such as the Trefis High Quality (HQ) Portfolio, that spread risk across multiple companies and sectors, rather than concentrating capital in individual positions. With a collection of 30 stocks, this portfolio has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

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