Jefferies raises AutoNation price target to $190 from $165

On Wednesday, Jefferies analyst Bret Jordan adjusted the price target for AutoNation Inc. (NYSE: NYSE:AN) shares, raising it to $190 from the previous $165, and reaffirmed a Hold rating on the stock. The revision follows AutoNation’s fourth-quarter adjusted earnings per share (EPS) of $4.97, which surpassed both Jefferies’ estimate of $4.33 and the consensus estimate of $4.26. The performance was bolstered by a strong new vehicle comparable sales increase of 13.3%, driven by a low double-digit percentage rise in new unit volume and robust sales in the premium luxury segment. This led to a 1.6% increase in the average selling price (ASP). According to InvestingPro data, AutoNation’s stock is currently trading near its 52-week high of $198.50, with analyst targets ranging from $170 to $230.

The analyst’s outlook for AutoNation is cautiously optimistic, citing factors that could contribute to the company’s growth. He anticipates that pent-up demand and easing affordability concerns may lead to modest volume growth in the fiscal year 2025. Additionally, the expectation of stabilizing gross profits per unit (GPUs) and solid demand for vehicle service are seen as indicators of potential future earnings growth for the automotive retailer. InvestingPro analysis shows that three analysts have recently revised their earnings upwards for the upcoming period, while management has been actively buying back shares, demonstrating confidence in the company’s prospects.

AutoNation’s recent performance, as outlined by Jefferies, suggests a resilient automotive market, particularly in the premium luxury sector. The company’s ability to outperform earnings estimates, coupled with a positive sales volume trajectory, has contributed to the revised price target. With a market capitalization of $7.74 billion and a P/E ratio of 11.39, AutoNation has demonstrated strong market performance, delivering a 26.82% return over the past year. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value.

The analyst’s commentary highlights the key drivers behind AutoNation’s earnings beat, pointing to the double-digit growth in new vehicle sales and the increase in average selling prices as primary factors. These elements have painted a picture of a company that is navigating the current market effectively, with a service demand that remains strong.

Investors and market watchers will likely monitor AutoNation’s progress as it capitalizes on the current market dynamics, with Jefferies’ updated price target providing a new benchmark for the company’s stock performance. The hold rating suggests a view that while the company is performing well, investors should maintain their current positions until further growth indicators emerge.

In other recent news, AutoNation has seen a surge in its financial performance, with its fourth-quarter earnings for 2024 exceeding market expectations. The company reported an adjusted earnings per share (EPS) of $4.97, surpassing the Stephens and consensus estimates of $4.22 and $4.26 respectively. The adjusted EBITDA for the quarter was $369 million, outperforming the Stephens and consensus forecasts of $326 million and $336 million. AutoNation’s revenue for the quarter also reached $7.21 billion, exceeding estimates of $6.67 billion.

Moreover, AutoNation witnessed growth in new unit sales and used unit volumes. The company’s new unit gross profits (GPUs) for the fourth quarter were $2,969, which was $165 more than the previous quarter. Looking ahead, AutoNation anticipates further growth in new unit sales and expects new margins to stabilize above historical levels in 2025.

In light of these developments, Stephens analysts have raised the price target on AutoNation’s shares to $200 from $195, while maintaining an Equal Weight rating on the stock. The revised price target is based on an 8.25 multiple of their 2025 EBITDA estimate for AutoNation. These recent developments reflect the strength of AutoNation’s business model and operations, positioning it favorably for the future.

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