Morgan Stanley downgrades AutoNation and Group 1 on dealer headwinds

Investing.com··US·Read original
3▲1 ▼2Impact / 5
Summary · why it matters

Morgan Stanley downgraded AutoNation to Equal-weight from Overweight and Group 1 Automotive to Underweight from Equal-weight, citing negative earnings revisions, higher rates and oil prices, and regulatory and technological overhangs facing franchise auto dealers. Analysts led by Daniela Haigian cut AutoNation's price target to $175 from $250 and lowered Group 1's target to $232 from $300, implying about 7% downside. The team said waves from AutoNation's guidance cut at its Laguna Conference continue to ripple through the market, and it cut third-quarter and fiscal 2027 EPS estimates across franchise dealers by about 7% and 5% on average, trimmed price targets by 18% on average, and lowered implied multiples by 1.2 turns. For AutoNation, the analysts pointed to a roughly 10% quarter-over-quarter decline in new-vehicle gross profit per unit, moderating parts and service growth as consumers defer elective work, and softer finance and insurance profitability, cutting its third-quarter and 2027 EPS by 8% and 6%, leaving it 9% and 6% below consensus. On Group 1, Morgan Stanley cited company-specific execution risk including U.S. rebranding disruption, used-vehicle sourcing challenges and the upcoming Hennessy integration, cutting third-quarter and 2027 EPS by 11% and 6%, which is 13% and 8% below consensus. The bank reiterated Carvana as its favorite idea in auto retail.

Impact on assets 5

Consumer Discretionary± Mixed · 4 stocks
AutoNation Inc
AN
▼ NegativeCapitalrelevance

Morgan Stanley downgraded AutoNation to Equal-weight and cut its price target to $175 from $250 on negative EPS revisions and dealer headwinds.

Group 1 Automotive Inc
GPI
▼ NegativeCapitalrelevance

Morgan Stanley downgraded Group 1 Automotive to Underweight and cut its price target to $232 from $300, citing execution risk and lower EPS estimates.

Carvana Co
CVNA
▲ PositiveCompetitionrelevance

Morgan Stanley reiterated Carvana as its favorite idea in auto retail while downgrading franchise dealers AutoNation and Group 1.

Financials▲ · 1 stocks
Morgan Stanley
MS
± MixedCapitalrelevance

Morgan Stanley is the author of the downgrades and estimate cuts, but the article reports its analyst actions rather than a company-specific development affecting Morgan Stanley itself.

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