Tata Motors shares drop for 4th session. Should you buy, hold or sell?

Shares of Tata Motors fell over a per cent in Tuesday's session to take its losing run to the fourth straight session amid concerns over British arm Jaguar Land Rover (JLR). Tata Motors shares have continued their recent weakness after the JLR management lowered its EBIT margin guidance for FY26 to 5-7 per cent from 10 per cent earlier. It also reduced its free cash flow (FCF) guidance to nil from 1.8 billion British pounds earlier.

Tata Motors also suggested that it is working hard to improve efficiencies across the firm, with specific enterprise missions to drive the firm's transformation amid headwinds, analysts who attended Tata Motors' virtual analyst meet said. 

On Tuesday, the stock fell 1.41 per cent to hit a low of Rs 677 on BSE. It is down 8 per cent in four sessions now.

"We have maintained our FY27 estimates at this stage. Given the multiple headwinds highlighted above, we reiterate Neutral with FY27E SOTP-based target price of Rs 690," MOFSL said in a note. 

Factoring in the lowered guidance, Elara Securities expects FY26 volumes to drop 5 per cent, with revenue at 28 billion British pounds and EBIT margin at 6 per cent, gradually reaching 8.5 per cent by FY28E. 

"With global demand scenario muted and high uncertainty due to tariffs, we expect a mere 2 per cent revenue CAGR at JLR through FY25-28E. We recommend Accumulate with a reduced target of Rs 734 from Rs 791, valuing JLR at 2.5 times adjusted EV/Ebitda, implying a P/E of 9 times," it said.

This is against Porsche valuation at 12 times; and BMW, Audi and Mercedes-Benz at 5-6 times. Elara has cut its target price on Tata Motors to Rs 734, suggesting a 'Reduce' rating.

JM Financial has revised JLR’s FY26 and FY27 EBIT margin assumptions to 5.5 per cent and 6.2 per cent from 8.5 per cent and 8.9 per cent earlier. "We downgrade TTMT to a HOLD rating, with a revised SOTP-based target price of Rs 705," it said.

Nuvama said it is building in a subdued 3 per cent revenue CAGR over FY25–27E owing to volume decrease at JLR (3 per cent CAGR) and muted growth in the India CV (2 per cent CAGR) division. 

In JLR, discontinuance of ‘Jaguar’ ICE models, loss of market share in the China region and imposition of tariffs in the US shall lead to volume contraction ahead, it said.

"Furthermore, we reckon a muted performance in the India CV division owing to reasonable utilisation levels at transporters, increasing competition from Railways and a high base. A muted demand outlook and increasing sales promotion/brand building spends would lead to a muted 3 per cent EBITDA CAGR over FY25–27E," Nuvama said. 

This brokerage suggested a target price of Rs 670 on the Tata Motors stock. 

Arihant Capital Markets said investors should add Tata Motors shares on decline. It suggested a target price of Rs 1,070 on the Tata group stock. Morgan Stanley has maintained 'Equal-weight' on Tata Motors with target price of Rs 715. Unlike past, past downcycle this time is much stronger for JLR on all fronts, it said.