You know Lexus. It’s a luxury car that’s become Japan’s best selling make of premium vehicle. And it’s a popular choice outside of Japan, too; Lexus cars are marketed in over 70 countries around the world.
So should you buy Lexus stock? Let’s look at the history of Lexus cars, and whether the stock may be a good investment for you.
Buy Shares in Lexus
To begin, you’ll need to know that Lexus cars are the premium line of vehicle built and sold by Toyota Motor Corp. Toyota is listed on the New York Stock Exchange under ticker symbol TM. That is to say, you can’t buy Lexus stock. Instead you’ll have to invest in parent company Toyota.
Toyota is the ninth largest company in the world by revenue, and has been in existence since the 1930s. But Lexus is a relatively new make of car. The brand was introduced at the Los Angeles Auto Show in 1988, and the first sedans were on the market in 1989.
Lexus began marketing itself as a luxury brand very early in the game. In 1988, the company selected 80 dealers who would be permitted to carry Lexus vehicles, followed by 121 in the year 1990. Because of this exclusivity and its claim of commitment to customer service, Lexus quickly outperformed Mercedes and BMW in sales by 1991.
Today, Lexus enjoys continued success, and was recently numbered at #64 on the most valuable brands list by Forbes. Since 1991, the brand has fallen behind Mercedes, Audi and BMW in sales. But this doesn’t indicate failure. In 2016, 678,000 Lexus cars were sold, up 4% from the previous year.
Lexus Stock Price History
Lexus had quite a successful start. Toyota, it would seem, excelled at branding its luxury product even before its release, which in turn caused a sense of exclusivity and created demand for Lexus cars. So what happened? Why does Lexus seem unable to get a leg up on the competition?
Unfortunately, many consumers associate Lexus with its parent company. That’s not to say that Toyota has a bad reputation. In fact, the opposite is true. Since its inception in 1937, Toyota Motor Corp worked to develop its name into a household one, and to build a reputation as an automotive innovator and as a manufacturer of quality cars. Toyota became the go-to for farm trucks and family cars. The Toyota share price reflects this fact, and the stock has been as reliable as its vehicles.
It’s perhaps this stellar reputation that has caused Lexus to fall behind the others. Why should a consumer buy a Lexus vehicle when they could buy an equally reliable and comfortable Toyota? Other automobile manufacturers have developed luxury brands just as Toyota did. Honda’s introduction of Acura vehicles in 1986 and Nissan’s release of Infiniti in 1989 are just two examples. And none have fared as well as the premium luxury brands.
Mercedes, Porsche, Audi and others remain the leaders because they are strictly luxury brands. With Lexus, there’s a measure of association of the brand with Toyota, and it’s for that reason that the brand has failed to surpass the competition.
Lexus Share Price
At the time this article was written, Toyota Motor Corp stock (NYSE:TM) was trading at just over $105 per share. Analysts have given the stock a “hold” rating. But the news isn’t all bad. Analysts have given a 12 month forecast average of $117, with a high estimate of $175 and a low of $95. That median is about an 11% increase from the current share price.
Toyota, however, has made the news recently. In April of this year, Lexus International Co president Tokuo Fukuichi stepped down from his position. He has since adopted a new role – he’s taken on the position of chief branding officer.
It’s unclear what effect Fukuichi’s new position will have on Toyota stock, but he certainly has some unique ideas in the pipeline for Lexus.
Lexus Stock News
Over the past year or so, there have been major advancements in the race to produce self driving cars. Nvidia, an artificial intelligence chipmaker, recently won a contract with Tesla and the cars are in the works.
People, and businesses as a result, want to push technology to the limits. From electric powered vehicles to self-driving cars, there’s always room to improve in applied science. And Lexus’s Fukuichi’s desires are no different.
Fukuichi, in his role as Lexus president, came to the realization that Lexus had become a more expensive extension of Toyota. And in an effort to change that perception, the chief branding officer has now begun to roll out plans to make a few changes to the brand.
We’ll look at those changes, but first a note in preface. We are by no means naysayers. Had no one believed we’d go to the moon, we wouldn’t have landed. Had no one believed that we could replicate organs using 3D printers, we wouldn’t have succeeded.
But we believe that such exploration should be done in the spirit of advancing science. Not to advance a brand. That said, Fukuichi has announced two new major products. The first of these is a luxury yacht. The second of these is a flying car.
Fukuichi intends to build a tiny flying car which will seat a sole driver. The company intends for that driver to light the flame at the Tokyo Olympic games in 2020. So far, the prototypes have been, quite frankly, crash and burn. The model will reportedly rise to about eye level before tilting and crashing to the ground. But only time will tell what developments will be made in the next few months.
Should You Buy Shares In Lexus?
Toyota Motor Corporation is a strong stock, and analysts agree that it’s best to hold onto it if you own shares. But as to whether you should buy stock, well, you might want to wait. Analysts aren’t excited about the strength of the yen or the prospects for its artificial intelligence development. That said, if you’re looking for a long term investment to buy and hold, you could certainly do worse than Toyota.
It remains to be seen what Fukuichi’s pipeline projects will deliver to Toyota Motor Corp. The result could be a stock price that flies as high as its cars or one that crashes and burns on a Jetson’s era Autobahn. But if you own Toyota stock, we do recommend that you hang on to them for the ride.