On Friday, Sonic Automotive (NYSE:SAH) received a significant upgrade from Bank of America (BofA) from Underperform to Buy, with a revised price target set to $68 from the previous $55 per share. This adjustment comes in the wake of Sonic Automotive's first-quarter earnings for 2024, which surpassed expectations and maintained the full-year outlook for 2024.
The upgrade was attributed to positive developments at EchoPark, Sonic Automotive's used car dealership chain, which is now expected to enhance the company's earnings per share (EPS) in 2024. EchoPark's performance has improved due to a strategic optimization of its store network, leading to increased sales efficiency and higher gross profit per vehicle.
According to analysts at BofA, the prior concerns that led to the Underperform rating for Sonic Automotive have begun to show favorable changes. The upbeat management commentary during the earnings call further supported the decision to raise the stock's rating. The company's ability to leverage selling, general, and administrative (SG&A) expenses has also been noted as a factor contributing to the upgraded outlook.
The new price target of $68 reflects a more optimistic view of Sonic Automotive's future performance, especially considering EchoPark's turnaround and its projected positive impact on the company's financial results. The maintained outlook for the fiscal year suggests stability and confidence in the company's strategic direction.
Investors may now watch Sonic Automotive as it continues to implement operational improvements and as EchoPark solidifies its position as a growth driver for the automotive retailer. The revised price target and rating upgrade indicate what analysts at BofA perceive as a positive shift in the company's trajectory.