AutoNation’s stock has risen by more than half this year, and the institutional research firm Benchmark says it can keep going as sales of cars and trucks increase.
AutoNation
‘s (ticker: AN) stock is up 55% this year, partly because the used-car retailer has benefited from higher vehicle prices. In February, the company reported better earnings and sales than expected for the fourth quarter. Earnings for the first quarter, posted in April, also beat the Street’s estimates, although sales were a touch below expectations.
The fact that CEO Michael Manley bought 7,000 shares worth $1 million on June 8 likely pushed up the stock price as well. Buying by insiders can signal to investors that the people who know a company best think the price will rise.
Benchmark’s Michael Ward recommended buying the stock in a research note on Monday. He expects AutoNation’s stock to rise to $200, up from his previous estimate of $185. That implies a 22% gain from Friday’s closing price of $164.61.
The stock moved 1.12% higher to close at $166.51 on Monday.
Last year, U.S. sales of light vehicles hovered between three million and 3.5 million units per quarter, compared with the 4.5 million hit in early 2021, according to the Benchmark report. Supply-chain disruptions due to the war in Ukraine and the lingering effects of Covid-19 meant automakers couldn’t make enough vehicles for consumers to buy while rising interest rates weighed on demand.
Things are looking up this year.
Ford Motor
(F) Chief Financial Officer John Lawler said on June 15 that while there are hiccups in terms of the availability of semiconductors, the problem is much smaller than it had been, while demand for vehicles has been relatively healthy. General Motors (GM) has been seeing strong demand, CEO Mary Barra said June 2.
Ward is bullish as well. He estimates second-quarter light-vehicle sales reached 4.1 million units, up 18% from a year earlier, and said 2023 sales are on track to reach 15.5 million units. That compares with estimates of 14.5 million to 15 million units before the start of the year.
The “improved industry demand pushes earnings higher; Buy,” Ward wrote. AutoNation is projected to report second-quarter earnings on July 19. The consensus forecast among analysts is for a per-share profit of $5.80.
Higher demand could also offer a boost to the stocks of automakers like Ford. Citi analyst Itay Michaeli upgraded Ford stock to Buy from Hold last month. He raised his target for the stock price to $16 from $12.80, citing the potential for the number of cars per U.S. household to increase.
Write to Karishma Vanjani at [email protected]
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