Is It Too Late To Buy Car Retailer Stocks Now?
Car retailer stocks were on sale. If you were waiting for bigger dips in used car prices amid the coronavirus pandemic, chances are that you have already missed the boat. It is a good sign for many beaten up car retailer stocks, and also a good sign for the economy.
Sales declined during the pandemic have plummeting stock prices. With the exception of Tesla (TSLA Stock Report), many auto stocks are down due to the cyclical nature of the industry. But many have slowly recovered from their lows and have been climbing steadily since. Many analysts were expecting a further fall in the stock prices, but it did not happen. There are a few reasons for that, though. One of the most obvious reasons is because many of the car retailers have moved their businesses online.
With coronavirus showing no signs of abating anytime soon, traveling by personal car is still the safest way to move about. Now, stay-at-home orders are being lifted. Business activities are slowly returning to normalcy. As such, the need for personal vehicles is even more pronounced. On top of that, the economic slowdown also prompts consumers to opt for used cars instead of splurging their savings on new cars. As such, sales of used cars have held up better than new cars.
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Top Automotive Stocks To Watch In July 2020: Sonic Automotive Stocks
First up, Sonic Automotive (SAH Stock Report) is getting all the attention it needs this week from automotive investors. Shares of Sonic Automotive have been hovering around the $30 mark for the past one month. Since releasing their fiscal report in April this year, there hasn’t been any specific news that could push the stock higher. That’s apart from the growth of used car sales in May.
The company’s used vehicle sales have increased in May, after witnessing declines in March and April. Sales of all used vehicles in the EchoPark segment increased 9% year over year in May, compared to a 30% plunge in April. During the first 15 days of June, the EchoPark unit recorded a 34% year-over-year sales increase.
As economies start to open up, pent-up demand for cars is emerging. That led to intense interests in the IPO of Vroom, an online used car dealer, on Monday. With renewed sentiments in the automotive industry, can we expect SAH stocks to continue its rally?
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Top Automotive Stocks To Watch In July 2020: CarMax
There are many things that investors don’t understand. One of them is the rally of Hertz (HTZ Stock Report) shares on Wednesday, followed by another 5% gain on Thursday. This came after Jefferies suggested that CarMax (KMX Stock Report) or AutoNation Inc (AN Stock Report) could ‘swoop in’. The most straightforward way to do that is for one of them to bid for 150,000 of the Hertz’s used cars, which are likely to be sold off to raise cash. That way, Hertz could see proceeds of $3 billion.
Investors were not expecting to hear much good news from CarMax’s fiscal 2021 first quarter earnings report. That’s understandable, because the period covers March to May. That’s when Covid-19 was in full force. And the lockdown measures at that time meant that most auto businesses were not operating.
CarMax has gone a long way in reducing its inventory of cars, moving more of the wholesale and consumer businesses to its digital sales channels, and simultaneously slashing costs for the company. Despite all that, the road ahead is still bumpy for the company and for investors. Even though we are seeing an improvement in sales, this could possibly just be the result of a pent-up demand. After all, with unemployment figures remaining high, the full recovery of car sales to pre-pandemic levels will likely take more time that we would like to imagine.
