AutoNation’s Rating Upgraded to Overweight at Morgan Stanley

Morgan Stanley analysts upgraded AutoNation (NYSE:AN) to Overweight from Equalweight, raising the price target on the stock to $200 from $145.

The analysts expressed confidence in CEO Mike Manley's leadership amid ongoing macroeconomic challenges, projecting that AutoNation's gross profit per unit (GPUs) will normalize post-pandemic but remain above 2019 levels. The analysts also expect the company's EBITDA to finish the year structurally higher than in 2019.

AutoNation’s stock is currently trading in line with the franchise dealer average, and the analysts pointed to the company's favorable exposure to Japanese OEMs, particularly Toyota, which accounts for nearly one-fifth of sales. This positions AutoNation well for recovering supply and increasing demand for hybrids. Additionally, the analysts noted that concerns about direct-to-consumer (DTC) electric vehicle disruption are being delayed as EV sales slow, reducing the immediate impact of this secular bear thesis.