LAD

Lithia Motors, Inc.

Consumer, Industrial/Transportation


Presented:08/10/2020
Price:$239.44
Cap:$5.47B
Current Price:$303.66
Cap:$8.12B

Presented

Date08/10/2020
Price$239.44
Market Cap$5.47B
Ent Value$6.48B
P/E Ratio20.16x
Book Value$67.20
Div Yield0.5%
Shares O/S22.84M
Ave Daily Vol291,136
Short Int18.79%

Current

Price$303.66
Market Cap$8.12B
Lithia Motors, Inc. engages in the operation of automotive franchises and retail of new and used vehicles. It operates through the following segments: Domestic, Import and Luxury. The Domestic segment comprises of retail automotive franchises that sell new vehicles manufactured by Chrysler, General Motors, and Ford. The Import segment composes of automotive franchises that sell new vehicles manufactured by Honda, Toyota, Subaru, Nissan, and Volkswagen. The Luxury segment includes retail automotive franchises that sell new vehicles manufactured by BMW, Mercedes-Benz, and Lexus. The company was founded by Walt DeBoer and Sidney B. DeBoer in 1946 and is headquartered in Medford, OR.

Publicly traded companies mentioned herein: CarMax Inc (KMX), Carvana Inc (CVNA), Lithia Motors Inc (LAD)

Highlights

In the presenter’s opinion, the auto industry, including dealers, have a misguided, but understandably bad reputation. He is long Lithia Motors (LAD) due to the risk/reward setup and belief that its management team can execute on its “aggressive” strategy over the next five years. The plan includes a combination of M&A across the US and a digital transformation/omni-channel initiative (Driveway) that’ll drive revenue to $50+ billion and EPS to $50+ (from an expected $12.3B and $13 in 2020, respectively). The argument to buy now is compelling, even after the steep run-up due to record Q2 earnings, because e-commerce is a “free call option” at $240. If management can execute on Driveway and demonstrate proof points, the business could grow to rival Carvana (CVNA) over five years and the stock should at least double because LAD has a number of advantages due to its dealer footprint. Also, M&A and strong results should backstop the valuation in the event that Driveway takes longer to evolve than anticipated.

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Idea Discussion

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