Toyota Motor Corp. (NYSE: TM) stock was down more than 2% today (Thursday) in early trading, following Wednesday's recall of every third-generation Prius the company has sold.
The recall covers 1.9 million vehicles worldwide, including 713,000 in North America. Reportedly, a programming glitch in the hybrid system prompted the recall. The malfunction could shut down the hybrid engine, forcing the vehicle to stop, even if it is being driven.
This was the third recall in the past five years for Prius. In 2012, the company recalled more than 7.4 million vehicles because of a fire concern stemming from the vehicle's power window
switches.
Toyota did not reveal any cost estimates for the most recent recall.
In addition to today's 2% drop, TM stock is down more than 11% in the past six months. Shares of Toyota currently trade at $115.55.
Despite the dismal recent performance, there are still bullish signs for TM stock.
Toyota (NYSE: TM) Still Strong Among Auto StocksFirst, Toyota is the world's top-selling automaker, having sold more than 9.98 million vehicles worldwide in 2013. That figure was a 2.4% gain from 2012 and outpaced the second-largest automaker, General Motors Co. (NYSE: GM), by 270,000 vehicles.
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Toyota expects to be the first automaker to ever top 10 million in global sales in 2014, after announcing a sales estimate of 10.32 million vehicles.
Another bullish sign for Toyota is the increasing demand from China, the world's largest auto market. Nearly 2.2 million vehicles were sold in China in January. That was a 6% increase from January 2013.
For the full year 2013, nearly 22 million vehicles were sold in China - an increase of 14% from 2012.
Money Morning's Capital Wave Strategist Shah Gilani recently discussed auto stocks on FOX Business' "Varney & Co." and mentioned Toyota as the best play among auto stocks currently.
"At this juncture I would pick Toyota Motors ahead of the others." Gilani said. "It gives a nice little dividend. I always like holding a stock that's going to pay me to hold it."
TM pays its shareholders a quarterly dividend $1.27, good for a 2.2% yield.
Those that have held the stock long term have seen a profit of 11% in the last 12 months. Its recent stock performance has been lackluster, but investors shouldn't be scared off.
Toyota, the world's largest automaker, still remains the best play in the auto industry.
Do you own a Prius that is being recalled? Do you own TM stock? Join the conversation on Twitter @moneymorning using #Toyota.
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Related Articles:
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Toyota to Recall 1.9 Million Prius Cars for Software Defect in Hybrid System - Business Standard:
China Car Sales at Record High - AutoBlog:
Toyota Is World's Top-Selling Automaker Two Years in a Row
The post Toyota Motor Corp. (NYSE: TM) Stock Down After Recall, but These Bullish Signs Remain appeared first on Money Morning - Only the News You Can Profit From.
