In a report released today, Chris Pierce from Needham reiterated a Buy rating on Sonic Automotive (SAH – Research Report), with a price target of $93.00.
Chris Pierce has given his Buy rating due to a combination of factors, despite some challenges observed in Sonic Automotive’s Echo Park segment. The analyst acknowledges a weaker than expected performance in the fourth quarter of 2024 for Echo Park, which led to a downward revision of the first quarter 2025 used retail estimates for both the franchise and Echo Park stores. However, Pierce maintains a positive outlook on the used auto market, noting recent improvements in wholesale data, although he anticipates a gradual recovery.
Despite these challenges, the Buy rating is supported by a valuation target of $93, driven by a substantial enterprise value of $7.8 billion. This includes $7.7 billion attributed to SAH’s franchise dealerships, evaluated at 10 times the fiscal year 2025 estimated standalone adjusted EBITDA, and $154 million for Echo Park, now valued at 5 times the fiscal year 2025 estimated adjusted EBITDA. Additionally, a 25% sum-of-the-parts discount is applied due to Echo Park’s size within the company, reflecting the overall strategic assessment of Sonic Automotive’s potential growth and market position.
In another report released on March 4, Bank of America Securities also maintained a Buy rating on the stock with a $85.00 price target.
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