Tata Motors shares shed multibagger tag; time to buy, sell or hold?

Shares of Tata Motors have faced selling pressure, shedding their multibagger tag in time period ranging from one to three years. The auto stock, which surged 97% in 2023 is down 0.70% this year. In the last two years, Tata Motors stock gave returns of 81%. However, they delivered multibagger returns of 263% in two years preceding December 31, 2023. 

On similar lines, the Tata Motors stock could rise 70% in the last three years. But when we compare returns from the stock for  three years preceding December 31, 2023, the stock rose an astounding 958% during ther period. 

This indicates the Tata Motors stock has given up its multibagger tag as returns for investors have fallen over the years. 

In the current session, the stock was trading in the green, rising over 0.31% to Rs 785.45. Market cap of the firm rose to Rs 2.89 lakh crore in the current session. On BSE, 2.92 lakh shares changed hands amounting to a turnover of Rs 22.95 crore. 

The stock has a one-year beta of 1.1, indicating very high volatility during the period.

The Tata Group stock is neither oversold nor overbought on charts, signals its RSI which stands at 33.16. The stock is showing weak trend in terms of short term and long term. Tata Motors shares are trading lower than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day moving averages.

At the current level, the stock is down 33.38% from its 52 week high of Rs 1179.05 reached on July 30 this year. The stock fell to its 52-week low of Rs 674.30 on November 28, 2023. 

Tata Motors stock has risen 373% in the last five years. However, the stock looks weak in the short term, falling 27% in three months and 18% in six months. 

Mileen Vasudeo, Senior Technical Analyst at Arihant Capital Markets has a sell call on the stock. 

"We are observing a lower top lower bottom formation in Tata Motors on the daily charts. Further, the momentum indicator RSI is negatively poised. Even the stock is underperforming the benchmark indices. At present the stock is facing resistance at Rs 830. Hence, one can sell the stock with a stop loss of Rs 840 for a target Rs 730–690 levels in a couple of weeks," said Vasudeo.

Jigar S Patel, Technical Research Analyst, at Anand Rathi Shares and Stock Brokers has called for dealing in Tata Motors stock with a cautious note in the near term. 

"Tata Motors has experienced a significant decline, raising concerns about its technical position. From an indicator perspective, the DMI on the monthly chart is signalling caution. The ADX line is notably higher than both the positive and negative DMI lines, suggesting a potential shift in momentum. Additionally, a bearish divergence has appeared, further confirming a potential downward trend. A long-standing 4-year bull trendline has been violated on the monthly chart, indicating the possibility of further weakness. As we move forward, it is advisable to book profits on any decent bounce from here on, with support anticipated around Rs 700 and resistance near Rs 850. Given the technical indicators pointing towards a potential top formation, a correction could be expected in the next 1-2 months," said Patel.

After Q2 earnings, MOFSL said there were clear headwinds ahead that could hurt Tata Motors performance. The brokerage lowered its EBITDA estimates for Tata Motors by 3 per cent for FY25 and 7 per cent for FY26 to factor in weakness in JLR business.

"The stock trades at 15 times FY25E/FY26E consolidated EPS and 6.5 times/5.5 times EV/Ebitda. We reiterate Neutral with September 2026E SOTP-based target price of Rs 840," it said.

Jefferies has reatined its 'Buy' call on Tata Motors. However, it has lowered its price target to Rs 1,000 from Rs 1,330 per share. JLR is expecting an improved second half and has maintained its margin guidance for FY25m, said Jefferies. However, Jefferies said a slowdown in demand for both CVs and PVs in India and consequently reduced its FY25-27 earnings estimates by 2-9 percent.

Global brokerage UBS has assigned a 'Sell' call on Tata Motors. It has trimmed its target to Rs 780 per share. JLR and CV segments have underperformed, although PV sales were in line with expectations, according to UBS. The brokerage said EBIT was disappointing. Additionally, Tata Motors has lowered its free cash flow (FCF) guidance to £1.3 billion from a prior forecast of £1.8 billion.

In the September 2024 quarter, Tata Motors reported a 11% fall in net profit. Net profit (attributable to shareholders) came at Rs 3343 crore against Rs 3764 crore profit in the September 2023 quarter. Revenue also fell 3.5% to Rs 1.01 lakh crore in the last quarter against Rs 1.05 lakh crore in the September 2023 quarter. Revenue was largely impacted by lower sales volumes.