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Toyota (NYSE:TM) just lit a fire under its stock, with shares soaring 11% over two daysthe biggest pop since August. Why? Reports suggest the automaker is gunning to double its return on equity (ROE) target to 20%. That's a gutsy move, and investors are loving it. Analysts are already dissecting the playbook, pointing to possible dividend hikes, share buybacks, and equity sales to make it happen. Morgan Stanley's Shinji Kakiuchi calls it ambitious but doableif Toyota cranks up its value chain efficiency and finds new profit streams. Translation? More cash in shareholders' pockets if they pull it off.
But let's pump the brakes for a second. Toyota isn't handing out deadlines or specifics, and challenges are piling up. Global sales? Flatlined in November. Production? Down for ten straight months. Meanwhile, the U.S. market is throwing curveballs, with tariff threats and EV competition heating up. Still, Toyota's been flexing this year, with shares up over 20%, crushing Japan's Topix index, thanks to a weaker yen boosting local currency revenues. Investors seem ready to bet that this momentum can carry through into 2025.
The real question is: can the world's biggest automaker back up this bold ROE ambition while navigating a minefield of global pressures? If they pull it off, Toyota could be setting the stage for a major stock re-rating. Stay tunedthis story's just getting started.
This article first appeared on GuruFocus.