Nissan Motor Co. NSANY shares have sunk 26.4% over the trailing 12-month period, underperforming the Zacks Auto, Tires and Trucks sector’s loss of 1.5% and the S&P 500 index’s gain of 17.1%.

NSANY is currently facing one of the most challenging periods in its history, struggling with financial instability, declining sales, leader uncertainty and increased competition in the global automotive market. The company is trying to stay afloat as it also battles mounting debt, operational inefficiencies and an inability to effectively compete in the rapidly growing electric vehicle (EV) market.

One-Year Performance

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Declining Sales & Financial Struggles

Despite efforts to stabilize operations, Nissan’s financial performance remains weak. In the first three quarters of 2024, its global retail sales dropped nearly 2% to 2.4 million units. Regionally, while North America showed modest growth of 2.4%, declines in Japan and Europe offset these gains. Furthermore, sales in China suffered significantly due to tough market conditions.

Nissan faces a record level of debt, expected to reach $5.6 billion by 2026, putting immense pressure on the company’s ability to invest in new technology and innovation. NSANY also had a troubling auto-free cash flow deficit of JPY 506 billion, straining its liquidity. All three major credit rating agencies have downgraded Nissan to junk status, making it even more difficult to secure financing.

Outdated Product Lineup

One of NSANY’s biggest challenges is its weakness in being able to attract consumers with a competitive product lineup. In the United States, Nissan has been forced to offer heavy discounts and incentives just to maintain sales, further cutting into its already-thin profit margins.

Several of its vehicle models are outdated compared to competitors like Toyota Motor TM and emerging Chinese EV manufacturers. TM’s advanced EVs, like the Toyota bZ4X, Lexus RZ 450e, Toyota bZ3 and Toyota Mirai, showcase the latest innovative technology, strengthening the company’s foothold in the growing EV market.

While Nissan was an early pioneer in EVs, having launched the world’s first mass-produced EV in 2010, the Nissan Leaf, it has failed to capitalize on its early lead, allowing rivals to dominate the market.

Leadership Instability & Merger Challenges

Nissan’s leadership is also in turmoil, with CEO Makoto Uchida under pressure to step down amid the company’s weak performance. The company explored a merger with Honda Motor Co. HMC but failed to reach an agreement due to disputes over terms.

The company has also canceled a three-party MoU (Memorandum of Understanding), which involved HMC and Mitsubishi MSBHF. The failures have left Nissan without strong strategic partnerships. Renault has also signaled that it may reduce its stake in NSANY, further isolating the struggling automaker.

Nissan’s Fiscal 2024 Outlook Slashed

NSANY has cut its full-year outlook thrice in fiscal 2024, with its latest full-year net sales forecast slashed by 1.6%. Operating profit guidance for fiscal 2024 has been cut by 20%. Net loss is expected to be JPY 80,000 and net loss per share is anticipated to be JPY 22.31.

A critical element of Nissan’s turnaround plan is restructuring its cost base. It plans to reduce the total workforce headcount by 5,300 in fiscal 2025 and an additional 1,200 in fiscal 2026. The company aims to close three of its plants, starting with the one in Thailand, in the first quarter of fiscal 2025. NSANY also plans to make shift changes at its key plants in Smyrna and Canton in the United States in fiscal 2025.

NSANY’s Revenue & Earnings Estimates Indicate Y/Y Decline

The Zacks Consensus Estimate for Nissan’s fourth-quarter 2024 revenues is pegged at $20.53 billion, indicating a year-over-year decline of 13.24%.

The consensus mark for fourth-quarter loss is currently pegged at 5 cents per share, unchanged over the past 60 days and suggesting a massive decline of 113.16% on a year-over-year basis.

Nissan Stock: Buy, Sell or Hold?

Given Nissan’s ongoing financial struggles, leadership instability and deteriorating market position, NSANY requires a cautious approach.

NSANY currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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