Toyota Motor Corporation (TM): A Bull Case Theory

We came across a bullish thesis on Toyota Motor Corporation on Value investing subreddit by Starza. In this article, we will summarize the bulls’ thesis on TM. Toyota Motor Corporation's share was trading at $201.38 as of September 17th. TM’s trailing and forward P/E were 9.03 and 13.07 respectively according to Yahoo Finance.

Toyota Motor Corporation (TM) stands out as a durable cash-generating engine with a unique combination of profitability, capital discipline, and optionality in EVs and autonomy. For the fiscal year ended March 2025, Toyota generated operating income in the ¥3.9–4.8 trillion range, alongside robust operating cash flow from its non-financial segment. Despite guiding to slightly lower near-term profits, the company continues to reward shareholders through an increased dividend of ¥90 for FY25 (guiding ¥95) and ongoing share repurchases, underscoring its ability to consistently return capital.

Trading at a trailing P/E of approximately 9x as of September 2025, Toyota’s valuation remains attractive given its scale, pricing power, and balance-sheet conservatism, offering a compelling value proposition relative to richly priced auto and tech peers. Toyota’s EV strategy is deliberately measured, focusing on hybrids and PHEVs where it enjoys cost and brand advantages, while selectively introducing BEVs in markets where unit economics are favorable. The company is also preparing next-generation solid-state batteries for production from 2027–2028 with Idemitsu, and has established a China BEV unit targeting ~100,000 Lexus-branded vehicles per year.

This multi-pathway approach mitigates execution risk and allows Toyota to benefit from the EV transition without overcommitting. In parallel, Toyota is building autonomy and software optionality through Woven, its advanced mobility arm, which integrates autonomous and “software-defined” vehicle technologies. Collaborations with Waymo, e-Palette shuttles, and the Woven City testbed exemplify upside optionality that, if realized, could substantially enhance the company’s growth profile.

Investors benefit today from consistent cash generation and shareholder returns, while the market undervalues the embedded optionality in EVs, energy storage, and autonomy. Toyota’s prudent, multi-pathway approach positions it as both a reliable investment and a potential growth lever if its technology initiatives gain traction, creating an asymmetric risk/reward setup.

Previously we covered a bullish thesis on Tesla, Inc. (TSLA) by Oliver | MMMT Wealth in April 2025, which highlighted the company’s long-term vision beyond automobiles, focusing on autonomy, AI, robotics, energy, and data despite near-term challenges. The stock has appreciated approximately 82.54% since our coverage, reflecting renewed confidence. Starza shares a similar focus but emphasizes Toyota’s cash generation, capital returns, and measured EV and autonomy strategy.

Toyota Motor Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 18 hedge fund portfolios held TM at the end of the second quarter which was 15 in the previous quarter. While we acknowledge the potential of TM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.