This AN Stock Forecast article was written by He Xu – Financial Analyst at I Know First

Summary

• For the first-quarter of 2022, revenue was up 14% to $6.8 and net income increased by 51% to $362 million compared to the year-ago period.
• First-quarter 2022 GAAP EPS was a record $5.83, an increase of 104% year-over-year.
• Used car sales have increased during the pandemic as people avoid mass transportation and are more sensitive to auto costs with the shortage of new cars.
• The company used store expansions, and digital capabilities, and used a vehicle growth strategy to expand the market.

Overview

AutoNation, Inc., an automotive retailer, owns and operates approximately 339 new vehicle franchises from 247 stores located in the United States, primarily in metropolitan markets in the Sunbelt region. The Company operates through three segments: Domestic, Import, and Premium Luxury. In addition, the franchises in each segment also sell used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products. Fourth-quarter 2021 GAAP EPS was a record $5.87, an increase of 239% year-over-year. For the last four quarters, EPS continuously beat the estimated Consensus EPS based on Yahoo.finance.

AN’s Growth Strategy Behind the Record of EPS in 2021

Strategy 1: Digital transformation

AN’s digital channels accounted for over 50% of unit sales in 2021. Leveraging AutoNation Express created the integrated digital solution with nearly 11 million real-time Customer insights to design a personalized digital experience for customers. They can start online, pick up in-store, or get a vehicle delivered. In summary, AutoNation is making a revolution in the automotive retail industry in a digital way.

Strategy 2: Used Vehicle Growth Strategy

With a lack of new cars from auto plants, and consumers more sensitive about spending on big items, used car sales boomed. Based on the revenue analysis, AutoNation’s used vehicle retail unit sales in 2022 Q1 increased by 47%, compared to the 2021 Q1, as shown in the bar chart. This strong performance was driven by broadly used vehicle sourcing, a successful business model, digital application, and a well-known brand effect. AutoNation is planning to open 12 additional new stores in 2022 from the existing 10 stores. If AutoNation will continue to expand its used vehicle retail business, this will help AutoNation stand out from the crowd of competitors in the used car market.

AN Stock Forecast: Estimate AN’s Performance

AN has gained huge revenue during 2021, therefore we analyzed the ability of AN’s profitability by comparing it with the industry. ROE of 56.96% and ROA of 16.96% are better than over 96% of companies in the Automotive Retail industry. Therefore, AN shows good profitability ability.

AN looks intriguingly in terms of Piotroski F-Score and Altman Z-Score. Piotroski F-score is a number between 0 and 9 that is used to assess the soundness of a company’s financial position. A score of 8 may indicate that the company’s stock is undervalued and can be interpreted by investors as a good signal to buy the stock. The Altman Z-score is the result of a credit test that measures the likelihood of a publicly owned manufacturing company going bankrupt. It is also at a safe level for AN.

The Yahoo Finance coverage for the company is performed by 17 analysts: 3 of them take the Buy position, while 12 and 2 of them take the Hold and Underperform positions. The analysts’ community puts the average target price for the stock at $158.00 while it is currently traded at $110.39.

Conclusion

AutoNation is a buy or hold stock with good profitability. The company has formed good growth strategies that will allow the company to expand its used vehicle market with increased demand for digitization during the pandemic. AN published the 1Q2022 financial statement, it has beaten the EPS expectations for the past four quarters. Also, AN looks promising in the context of its Piotroski F-Score with a rate of 8.

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts, supporting my position for the AutoNation stock forecast. The dark green is a strong bullish signal for the one-year forecast.

Past Success with AN Stock Forecast

I Know First has been bullish on the AN stock forecast in the past. On April 19^th, 2022 the I Know First algorithm issued a forecast for AN stock price and recommended AN as one of the best Automotive Stocks to buy. The Deep-Learning-driven AN stock prediction was successful on a 14-day time horizon resulting in more than 19.45%.

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Please note-for trading decisions use the most recent forecast.