©Reuters.
On Thursday, Morgan Stanley upgraded AutoNation, Inc. (NYSE:NYSE:) from underweight to equal weight and raised its price target from $117 to $140.
The company's ratings suggest that AutoNation and Group 1 Automotive (NYSE:) are well-positioned to navigate current market trends compared to their peers in the franchise dealer sector.
This upgrade represents a more balanced move for AutoNation, despite continued concerns such as potential downside earnings, higher valuations relative to historical levels, and challenges from inventory recovery and OEM margin pressures. It reflects a view of risk-reward scenarios.
Morgan Stanley's analysis indicates that there is little downside risk to AutoNation's revised target price, which contributed to the decision to adjust the stock rating.
The company upgraded AutoNation's rating, but other companies such as Asbury Automotive Group (NYSE:), Lithia Motors (NYSE:), Penske Automotive Group (NYSE:) and Sonic Automotive (NYSE:) maintained an underweight position in industry companies. These companies are considered to be less well-positioned to take advantage of current industry themes.
Group 1 Automotive's recent activities are also highlighted, with particular emphasis on its relationship with Group 1 Automotive. Toyota (New York Stock Exchange:). GPI's Toyota sales growth, which accounts for one in five cars sold, is expected to benefit from improved inventory levels and a stronger hybrid mix.
Notably, on February 12, GPI acquired RRR Automotive Group, which is expected to generate $900 million in revenue in FY24 and strengthen OEM exposure in Japan and South Korea.
Additionally, on February 26, GPI announced the acquisition of two Lexus dealerships in California, which is expected to contribute $350 million to annual revenue. AutoNation's performance is also notable for being supported by strong sales of imported brands, with Toyota accounting for almost a fifth of its 2023 sales.
This article was generated with the help of AI and reviewed by an editor. Please see our Terms of Use for more information.
