Lithia Motors Snaps Up Latham Ford Dealership; Street Says Buy

Auto retailer chain Lithia Motors has acquired Latham Ford marking the 12th store to be added to its network in the past 2 months. The store serves the NY, Albany, metropolitan area.

Lithia (LAD) anticipates Latham Ford will generate an annualized revenue of $55 million to the group. The acquisition was funded using free cash flow and current on-balance sheet capacity. The company’s total network expansion in 2020 has exceeded $1.75 billion in revenue, it said. Lithia has built a wide-ranging coast-to-coast automotive retail network of new and used vehicles which now covers more than 92% of the US.

“The growth of our physical network expands our ability to provide consumers with convenient and affordable new vehicle, used vehicle, service and parts solutions. Together, with our Driveway digital home channel, we are providing flexible and complete vehicle ownership solutions wherever, whenever and however consumers desire,” said Lithia Motors CEO Bryan DeBoer. (See LAD stock analysis on TipRanks)

On Sept. 30, LAD announced the pricing of its public offering of 3,181,819 shares of its Class A common stock at a price to the public of $220 per share. In addition, the company disclosed the pricing of its private offering of $550 million aggregate principal amount of 4.375% senior notes due 2031.

Last week, J.P.Morgan analyst Rajat Gupta raised the stock’s price target to 330% (16.95% upside potential) from $280 and reiterated a Buy rating saying that the company’s announcement is “incrementally positive”. The analyst supports the view of “differentiated” core growth profile and the ability of the company to execute in a tough macro backdrop. “The company’s “sizeable” capital raise accelerates the key network expansion step in its transformation and path towards $50-plus in earnings per share”, he added.

The Street shares Gupta’s bullish outlook. The Strong Buy analyst consensus boasts 5 unanimous Buys. The average analyst price target of $285 implies upside potential of about 5.9% in the coming months with shares already up 83.05% year-to-date.