Tuesday, April 5, 2016

Upside Likely With Lithia Earnings

Outpacing SAAR, SAAR Still Strong Year-Over-Year.
Likely looking for other major acquisitions.
Still major cost saves ahead from DCH acquistion.
Lithia Motors (NYSE:LAD) stock has been hit by 1/3 with fears that rates are moving up and that the SAAR may be peaking. We believe, however, that business is likely still strong and there are multiple reasons for the stock to approach and surpass recent highs.
Recent worries include:
-Sub-prime weakness
-Discounting at retail
-SAAR peaking
Before we review the company drivers we wanted to tackle the concerns one by one.
Fear 1: Sub-prime
Lithia said on their last call, February 24th, that they were not seeing any sub-prime weakness. Much of the worry was reported around that time so we think that the company's public statements should allay investors' worries. Lithia is less exposed to subprime than their peers. They have about 13-14% of revenues attached to subprime sales while competitors are mostly much higher as a percent of sales.

#in, $LAD

Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. Disclosure: These trades can lose you money and principle especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS

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