Lithia & Driveway upgraded to Overweight from Neutral at JPMorgan

JPMorgan upgraded Lithia & Driveway to Overweight from Neutral with a price target of $280, up from $270. While the used car market has seen a partial recovery year-to-date driven by a combination of slightly better affordability and temporarily better commercial auction supply, JPMorgan sees lingering supply constraints, both cyclical and structural, that is likely to “put a lid on any inflection in unit sales” over the next 12-18 months, the analyst tells investors in a research note. Given the combination of still tough affordability backdrop for consumers, choppy used car supply and industry volumes that have been running below normalized levels and record average car age, the firm pivoted its rating preference to companies that have a more visible positive earnings revision backdrop driven by company-specific execution opportunities and/or unique secular tailwinds. Carvana (CVNA) is its top pick in the retail ecosystem.