AutoNation (AN) Stock Forecast & Price Target

AutoNation's strong revenue performance for 2024, projected at approximately $27 billion, is underscored by a 7.7% year-over-year increase in same-store sales, particularly bolstered by a 13.3% rise in new vehicle sales and significant gains in its AutoNation USA used-vehicle stores, which saw an 18.9% increase year-over-year. The company exhibited effective cost management, as evidenced by only a 30 basis point year-over-year increase in SG&A as a percentage of gross profit, demonstrating operational efficiency amidst growing revenues from parts and service, which increased by 3.4% year-over-year. Furthermore, the consistent improvement in finance and insurance (F&I) revenue, up 5.4% year-over-year, coupled with an overall performance that reflects strong demand for both new and used vehicles, reinforces a favorable outlook for AutoNation's financial health.

AutoNation's financial performance exhibits several concerning trends that contribute to a negative outlook. The company's operating margin declined by 31 basis points to 4.9%, while gross margin decreased by 74 basis points year-over-year to 17.2%, both metrics falling below estimates and highlighting potential issues in sales mix and profitability. Additionally, the modest decline in used vehicle sales, alongside a projected decrease in gross profit per unit for new vehicles in 2025, raises concerns about future revenue generation and market competitiveness.