JPMorgan lifts Autohome stock rating, raises target to $36

On Wednesday, JPMorgan analyst Alex Yao upgraded Autohome Inc. (NYSE: ATHM) stock rating from Neutral to Overweight, simultaneously increasing the price target to $36 from the previous $24. The upgrade reflects a positive shift in the company’s earnings growth outlook, particularly due to an improved media services outlook. According to InvestingPro data, Autohome maintains a "GREAT" financial health score of 3.07, with impressive gross profit margins of 79% and a robust current ratio of 5.56.

Autohome, a prominent player in the online auto market, experienced a decline in adjusted operating profit (OP) for five consecutive years starting in 2020. During this period, the company’s stock performance lagged behind the sector average by 38 percentage points when compared to the KWEB index. Despite these challenges, InvestingPro data shows the company maintains strong fundamentals, including zero debt and a significant 7.6% dividend yield. The underperformance was attributed to several factors, including heightened competition in the auto market, leading to a reduced share of media advertising budgets, the emergence of new electric vehicle (EV) startups that spend less on traditional vertical channels, a shift in revenue mix towards lower margin new initiatives, and increased competition for online auto advertising budgets from mobile content platforms.

However, JPMorgan anticipates a reversal in Autohome’s fortunes. The company’s adjusted operating profit and adjusted earnings per share (EPS) are expected to enter positive territory in 2025, signaling a recovery. This turnaround is supported by signs of stabilization in high-margin media service revenue. JPMorgan forecasts a 9% growth in the company’s 2025 adjusted EPS, in contrast to the Bloomberg consensus estimate, which predicts a 6% decline.

The analyst’s optimistic outlook is based on these emerging positive trends, suggesting that Autohome is positioned for a return to growth. This upgraded assessment and substantial raise in the price target to $36 reflect the firm’s confidence in Autohome’s potential to outperform within the sector.

In other recent news, Autohome Inc. reported its fourth-quarter results, with adjusted earnings per share surpassing analyst expectations at RMB4.21 ($0.58), compared to the consensus estimate of RMB3.43. Despite this earnings beat, the company’s revenue fell short of forecasts, reaching RMB1.78 billion ($244.3 million) against the expected RMB1.87 billion, marking a 6.7% year-over-year decline. Net income attributable to shareholders also decreased to RMB320.5 million ($43.9 million) from RMB446.7 million in the previous year. For the full year 2024, Autohome reported net income of RMB1.68 billion ($230.3 million) on revenue of RMB7.04 billion ($964.4 million).

Jefferies has raised its price target for Autohome to $34.00 from $33.90, maintaining a Buy rating on the stock following the earnings report. The firm noted that media service revenue showed improvement, although leads generation revenue was weaker. The change in Autohome’s controlling shareholder to Haier is expected to create synergies, particularly in the used car segment, and collaborations with Ping An are anticipated to expand across various areas. Analysts at Jefferies expect the media service sector to see a reduced year-over-year decline in the first quarter, while leads generation is projected to align with industry growth. The company’s effective cost control measures and strategic direction have been highlighted as positive factors by analysts.

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