Freedom Broker noted revenue growth and Toyota’s share buyback

Freedom Broker analysts maintained a “Buy” recommendation on Toyota Motor Corp. (TM) shares and a target price of $230. The automaker continues to post resilient revenue and strong cash flow, while temporary pressure on operating profit may ease. Additional support for the shares could come from a new share buyback program of ¥1 trillion ($6.3 mln). Freedom Broker’s $230 target price implies upside of +22.7% from the current price of $187.4.

Toyota: the largest automaker by sales

Toyota Motor Corp. is one of the world’s largest automakers and a leader in new-vehicle sales volumes. The company produces vehicles under the Toyota and Lexus brands and also develops financial services that help customers purchase cars through loans and leasing, finance auto dealers, and provide insurance services 

According to Freedom Broker analysts, Toyota shares retain upside potential thanks to resilient cash flow, a large-scale capital return program for shareholders, and prospects for a recovery in operating margins after pressure from temporary factors subsides.

Revenue beat market expectations

Toyota reported results for Q1 of fiscal 2027, which ended on June 30, 2026. The company’s revenue rose 10.4% year over year to ¥13.5 trillion ($85.4 bln).

The core automotive business increased revenue by 8.8% to ¥12 trillion ($75.5 bln), while the financial segment grew 23.3% to ¥1.4 trillion ($8.8 bln). Revenue growth was seen across all key regions: the figure rose most notably in North America—up 14.9% to ¥6.1 trillion ($38.5 bln)—and in Europe—up 20.4% to ¥1.9 trillion ($11.3 bln). 

At the same time, revenue growth has not yet led to an increase in operating profit. The metric fell 8.8% year over year to ¥1 trillion ($6.7 bln), and the operating margin was 7.9% versus 9.5% a year earlier.

Rising costs weigh on margins

As Freedom Broker experts note, the positive effect from the weaker Japanese yen was not able to fully offset higher expenses. Results were impacted by higher raw material costs, expenses related to the conflict in the Middle East, and costs following the cancellation of certain development projects.

Meanwhile, Toyota’s net profit rose 75.6% to ¥1.5 trillion ($9.3 bln). Profit before tax increased 56.8% to ¥1.9 trillion ($12.3 bln).

The automotive segment, with revenue up 8.8%, reduced operating profit by 21% to ¥719.9 bln ($4.5 bln). Financial services, by contrast, increased operating profit by 24% to ¥275.6 bln ($1.7 bln), mainly due to growth in the loan portfolio.

Toyota raised its forecast for the fiscal year

The company improved its revenue forecast for fiscal 2027. Toyota now expects the figure at ¥54 trillion ($341 bln), which is 6.5% higher than the previous forecast of ¥51 trillion ($322.1 bln).

At the same time, the profit outlook remains more restrained. Operating profit is expected at ¥3.4 trillion ($21.4 bln). Freedom Broker analysts suggest that for the full fiscal year Toyota’s revenue may reach ¥54.5 trillion ($344 bln), operating profit ¥3.5 trillion, and deliveries 11.18 mln vehicles.

A ¥1 trillion buyback strengthens capital returns

Another factor supporting the shares, analysts say, is the new share buyback program. Toyota announced its intention to repurchase its own shares for up to ¥1 trillion ($6.3 bln).

In addition, the company plans to pay ¥100 ($0.06) in dividends per share in fiscal 2027. In total, Toyota intends to allocate about ¥1.3 trillion ($8.2 bln) to dividends. Thus, the capital return program becomes one of the key arguments in favor of Toyota shares against the backdrop of weaker operating profit dynamics.

Results of previous quarters

Ahead of the reporting, Toyota had shown mixed sales dynamics. In May, the company’s global sales declined for the fourth straight month—down 7.2% year over year to 834,279 vehicles. The main pressure came from overseas markets: sales in China fell 31.7%, in the Middle East 38.6%, and in the U.S. by about 0.6%. Meanwhile, sales in Japan rose 11.1%.

In the U.S., the situation looked more resilient: in Q2 2026, Toyota increased sales by 1% to 621,318 vehicles versus 615,349 a year earlier. The main drivers were hybrid models, crossovers, and SUVs, including the RAV4, Grand Highlander, and Tacoma. At the same time, high prices for new vehicles and expensive auto loans continued to constrain demand.

Not an individual investment recommendation.