BofA Sees Long-Term Upside in Sonic Automotive (SAH), Target raised to $94
An auto warehouse filled with newly acquired used cars. According to the analyst, the slight downward revision in U.S. auto sales and production estimates for 2025 and 2026 accounts for potential headwinds, including tariff-related disruptions, supply chain risks around rare earth materials, and ongoing macroeconomic uncertainty. BofA now projects U.S. industry sales at 16.25 million units in 2025 and 16.9 million in 2026, with North American production expected at 15.75 million and 16.4 million units, respectively. Despite these near-term challenges, the analyst believes most of the pressures should ease by late 2025 or early 2026. The revised target on Sonic Automotive reflects this measured optimism, incorporating the expected normalization of conditions over the medium term. Sonic Automotive Inc. (NYSE:SAH) is one of the largest automotive retailers in the United States. Its services include the sale of both new and used cars and light trucks, sales of replacement parts, vehicle maintenance, warranty services, paint and repair services, and other aftermarket services. While we acknowledge the potential of SAH as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: and 10 Best Tech Stocks to Buy According to Billionaires. Disclosure: None.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Miami Herald
17 minutes ago
- Miami Herald
American Eagle jumps most since 2000 after Trump praises Sydney Sweeney ad
American Eagle Outfitters Inc. shares jumped the most since 2000 on Monday after U.S. President Donald Trump touted the company's ads - pushing the retailer's stock into meme stock territory. The shares spiked 24% on Monday after Trump said in a social media post that American Eagle's recent marketing blitz with actress Sydney Sweeney is the "HOTTEST ad out there." He said American Eagle jeans are "flying off the shelves." It's not yet clear whether the ad campaign – which controversially celebrates Sweeney's genetic traits as well as her jeans – is actually convincing shoppers to buy the company's apparel. Analysts say the real test will be how American Eagle performs during the crucial back-to-school season as consumers begin to stock up on jeans and other autumn essentials. So while Trump's comments on Monday don't reveal any new information about the company's performance, they do add to the hype around American Eagle shares. And that's drawn investors betting on the hype itself – a telltale sign of a meme stock. "What are meme stocks for the most part? Individual investors chasing after the hottest stock," said Matt Maley, chief market strategy at Miller Tabak & Co. Monday's move pared the stock's year-to-date decline to 20%. The company has been battered by sluggish demand and last quarter it registered a $75 million charge related to a writedown of its spring and summer merchandise. Some traders who drove up the shares on Monday are probably betting that the spotlight on the company will translate into greater sales. But that alone doesn't explain the magnitude of the share move, Maley said, adding that American Eagle executives should seize on the interest by, for example, issuing more shares. Meme stock darlings AMC Entertainment Holdings Inc. and GameStop Corp. have done this in the past. Representatives for American Eagle didn't immediately respond to a request for comment. "In the short term, traders are very adept at chasing hype," said Steve Sosnick, chief strategist at Interactive Brokers. "If one believes that the more this is talked about, the better it is for the stock, then that certainly is a boon." "Whether or not that translates into more or fewer people buying the actual products" after Trump weighed in won't be clear for "days, weeks or quarters," he added. The interest in American Eagle is likely to continue, even if there's not another major precipitating event like a social media post by the U.S. president. "The momentum is there," Maley said. "Today's marketplace with algorithmic trading, not only does it create buyers, but it eliminates sellers." While Sweeney, a sought-after face for brands, has provided a pop for stocks in the past, those gains haven't always endured. A year ago, footwear company Crocs Inc. disclosed Sweeney as a global spokesperson for its HEYDUDE line. The stock rose 4.1% on the day of the announcement, but since then, shares are down nearly 30%. (With assistance from Janet Freund.) Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Yahoo
24 minutes ago
- Yahoo
Trex's (NYSE:TREX) Q2 Sales Top Estimates
Composite decking and railing products manufacturer Trex Company (NYSE:TREX) beat Wall Street's revenue expectations in Q2 CY2025, with sales up 3% year on year to $387.8 million. On the other hand, next quarter's revenue guidance of $300 million was less impressive, coming in 1% below analysts' estimates. Its non-GAAP profit of $0.73 per share was 2.8% above analysts' consensus estimates. Is now the time to buy Trex? Find out in our full research report. Trex (TREX) Q2 CY2025 Highlights: Revenue: $387.8 million vs analyst estimates of $377.1 million (3% year-on-year growth, 2.8% beat) Adjusted EPS: $0.73 vs analyst estimates of $0.71 (2.8% beat) Adjusted EBITDA: $122 million vs analyst estimates of $117.9 million (31.5% margin, 3.5% beat) Revenue Guidance for Q3 CY2025 is $300 million at the midpoint, below analyst estimates of $303.1 million Operating Margin: 26.4%, down from 31.1% in the same quarter last year Free Cash Flow Margin: 52.3%, up from 42% in the same quarter last year Market Capitalization: $6.8 billion 'Our prominent position in both the pro channel and home centers enabled Trex to deliver another quarter of sales performance that exceeded expectations,' said Bryan Fairbanks, President and CEO. Company Overview Addressing the demand for aesthetically-pleasing and unique outdoor living spaces, Trex Company (NYSE:TREX) makes wood-alternative decking, railing, and patio furniture. Revenue Growth Examining a company's long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Trex's 7.7% annualized revenue growth over the last five years was decent. Its growth was slightly above the average industrials company and shows its offerings resonate with customers. Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Trex's annualized revenue growth of 7.6% over the last two years aligns with its five-year trend, suggesting its demand was stable. This quarter, Trex reported modest year-on-year revenue growth of 3% but beat Wall Street's estimates by 2.8%. Company management is currently guiding for a 28.4% year-on-year increase in sales next quarter. Looking further ahead, sell-side analysts expect revenue to grow 13% over the next 12 months, an improvement versus the last two years. This projection is noteworthy and suggests its newer products and services will catalyze better top-line performance. Software is eating the world and there is virtually no industry left that has been untouched by it. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming. Click here to access a free report on our 3 favorite stocks to play this generational megatrend. Operating Margin Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development. Trex has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 24.5%. This result isn't surprising as its high gross margin gives it a favorable starting point. Looking at the trend in its profitability, Trex's operating margin decreased by 3.3 percentage points over the last five years. This raises questions about the company's expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. In Q2, Trex generated an operating margin profit margin of 26.4%, down 4.6 percentage points year on year. Since Trex's operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased. Earnings Per Share Revenue trends explain a company's historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions. Trex's EPS grew at an unimpressive 4.5% compounded annual growth rate over the last five years, lower than its 7.7% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes. We can take a deeper look into Trex's earnings to better understand the drivers of its performance. As we mentioned earlier, Trex's operating margin declined by 3.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don't tell us as much about a company's fundamentals. Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business. For Trex, its two-year annual EPS growth of 10.7% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history. In Q2, Trex reported adjusted EPS at $0.73, down from $0.80 in the same quarter last year. Despite falling year on year, this print beat analysts' estimates by 2.8%. Over the next 12 months, Wall Street expects Trex's full-year EPS of $1.79 to grow 34.1%. Key Takeaways from Trex's Q2 Results We enjoyed seeing Trex beat analysts' revenue expectations this quarter. We were also happy its EBITDA outperformed Wall Street's estimates. On the other hand, its revenue guidance for next quarter slightly missed. Overall, this print was mixed. The stock remained flat at $64.50 immediately following the results. Sure, Trex had a solid quarter, but if we look at the bigger picture, is this stock a buy? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it's free. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
29 minutes ago
- Yahoo
Capital Allocation Trends At Koyo International (Catalist:5OC) Aren't Ideal
Explore Koyo International's Fair Values from the Community and select yours What underlying fundamental trends can indicate that a company might be in decline? Businesses in decline often have two underlying trends, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. Basically the company is earning less on its investments and it is also reducing its total assets. So after we looked into Koyo International (Catalist:5OC), the trends above didn't look too great. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. Understanding Return On Capital Employed (ROCE) For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Koyo International is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.0012 = S$24k ÷ (S$47m - S$26m) (Based on the trailing twelve months to December 2024). Therefore, Koyo International has an ROCE of 0.1%. Ultimately, that's a low return and it under-performs the Construction industry average of 9.1%. View our latest analysis for Koyo International While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Koyo International's past further, check out this free graph covering Koyo International's past earnings, revenue and cash flow. What The Trend Of ROCE Can Tell Us In terms of Koyo International's historical ROCE movements, the trend doesn't inspire confidence. Unfortunately the returns on capital have diminished from the 0.5% that they were earning five years ago. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. If these trends continue, we wouldn't expect Koyo International to turn into a multi-bagger. While on the subject, we noticed that the ratio of current liabilities to total assets has risen to 56%, which has impacted the ROCE. Without this increase, it's likely that ROCE would be even lower than 0.1%. And with current liabilities at these levels, suppliers or short-term creditors are effectively funding a large part of the business, which can introduce some risks. What We Can Learn From Koyo International's ROCE In summary, it's unfortunate that Koyo International is generating lower returns from the same amount of capital. It should come as no surprise then that the stock has fallen 50% over the last five years, so it looks like investors are recognizing these changes. With underlying trends that aren't great in these areas, we'd consider looking elsewhere. Koyo International does have some risks, we noticed 6 warning signs (and 5 which are a bit concerning) we think you should know about. While Koyo International may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
