JPMorgan lifts Autohome stock rating, targets HK$71

On Wednesday, JPMorgan analyst Alex Yao revised the rating for Autohome Inc. (NYSE: ATHM), a leading online destination for automobile consumers in China, from Neutral to Overweight. The firm also significantly increased the price target for Autohome’s H-shares (2518:HK) to HK$71.00, up from the previous target of HK$47.00. According to InvestingPro data, the company maintains excellent financial health with an overall score of "GREAT" and currently offers an attractive 7.6% dividend yield.

The upgrade reflects JPMorgan’s optimism regarding Autohome’s earnings growth potential, driven by an improved media services outlook. While the company’s adjusted operating profit (OP) had been declining for five consecutive years since 2020, leading to a 38 percentage point underperformance against the sector average, as tracked by the KWEB index, InvestingPro analysis reveals impressive gross profit margins of 78.93% and a strong current ratio of 5.56, indicating robust operational efficiency and financial stability.

Autohome’s previous stock performance issues were attributed to several factors, including increased competition in the auto market, which resulted in a smaller share of media advertising budgets, and the rise of new electric vehicle (EV) start-ups that tend to spend less on traditional vertical channels. Additionally, the company’s revenue mix had been shifting towards newer initiatives with lower margins, and there was growing competition for online auto advertising budgets from mobile content platforms.

However, JPMorgan anticipates a turnaround in Autohome’s financial performance. The firm expects the company’s adjusted operating profit and adjusted earnings per share (EPS) to enter positive territory in 2025, with a forecasted adjusted EPS growth of 9%. This is in contrast to the Bloomberg consensus estimate, which predicts a 6% decline.

The analyst’s commentary highlighted signs of stabilization in high-margin media service revenue, which is a key driver for the expected positive shift in Autohome’s earnings. The upgrade to Overweight indicates a confidence in the company’s ability to navigate the challenges it has faced and capitalize on its media services segment for future growth.

In other recent news, Autohome Inc. reported fourth-quarter earnings that exceeded analyst expectations, with adjusted earnings per share reaching RMB4.21 ($0.58), surpassing the consensus estimate of RMB3.43. However, the company’s revenue fell short of forecasts, coming in at RMB1.78 billion ($244.3 million) compared to the expected RMB1.87 billion. Despite the revenue miss, Autohome’s online marketplace and others revenues grew 3.3% year-over-year to RMB588.2 million ($80.6 million) in the fourth quarter. The company reported a full-year 2024 net income attributable to shareholders of RMB1.68 billion ($230.3 million) on revenue of RMB7.04 billion ($964.4 million).

Analysts at JPMorgan have upgraded Autohome’s stock rating from Neutral to Overweight, raising the price target to $36, reflecting a positive shift in the company’s earnings growth outlook. Jefferies also raised its price target for Autohome to $34, maintaining a Buy rating after the company’s earnings beat expectations. Autohome’s media service revenue received a boost, although this was slightly offset by a weaker performance in leads generation revenue. The change in controlling shareholder to Haier is expected to create synergies, particularly in the used car segment, while collaborations with Ping An are anticipated to cover various areas.

Both JPMorgan and Jefferies have expressed confidence in Autohome’s strategic direction and potential for future growth. Investors are closely monitoring the company’s ability to maintain its momentum and return to top-line growth in the coming years.

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