What Happened?
Shares of automotive retailer Lithia Motors (NYSE: LAD) jumped 4% in the afternoon session after an analyst at Citi raised the company's price target and initiated an "upside 30-day catalyst watch" on the stock. The bank boosted its price target on the stock to $383 from $378 and maintained its "Buy" rating. Citi analysts noted that a recent dip in the share price presented a favorable buying opportunity. The firm anticipated Lithia would proactively pursue acquisitions, as new trade agreements opened the door for more deals. Additionally, the bank pointed to a potential Federal Reserve interest rate cut in September as a factor that could benefit the entire automotive dealership industry.
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What Is The Market Telling Us
Lithia’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock dropped 5.1% as reports pointed to a broad-based weakening of consumer health, highlighted by rising loan delinquencies and falling spending intentions. This downturn was fueled by multiple reports signaling a deteriorating financial situation for consumers. Data revealed that even upper-income Americans are increasingly falling behind on credit card and auto loan payments, suggesting big-ticket spending is fading. Further dampening sentiment, the latest Consumer Confidence report, despite a headline increase, showed that consumers are being more cautious. The auto sector also flashed warning signs, with projections for July showing flat sales compared to last year, weighed down by high prices and interest rates.
Lithia is down 14.3% since the beginning of the year, and at $299.01 per share, it is trading 24.2% below its 52-week high of $394.27 from November 2024. Investors who bought $1,000 worth of Lithia’s shares 5 years ago would now be looking at an investment worth $1,233.
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