AutoNation Inc.

Overview Key strengths Key risks Resilient business model with diverse revenue streams. Risk of disruption from online competitors, direct-to-consumer sales models, and transition to electric vehicles. Strong history of solid operational execution. Exposure to the cyclical new vehicle sales market. Consistent free operating cash flow (FOCF) generation. Balancing expansion opportunities and share buybacks with maintaining appropriate credit metrics. For the six months ended June 30, 2022, higher selling prices of vehicles yielded record EBITDA margins of 8.9%, but we expect these margins to fall over the next couple of years. As vehicle production volumes recover and demand cools off due to increasing interest rates and a likely imminent recession, we expect vehicle prices to fall, with new prices following the

...We expect margins for Autonation Inc. to normalize over time as vehicle prices start to moderate. For the six months ended June 30, 2022, higher selling prices of vehicles yielded record EBITDA margins of 8.9%, but we expect these margins to fall over the next couple of years. As vehicle production volumes recover and demand cools off due to increasing interest rates and a likely imminent recession, we expect vehicle prices to fall, with new prices following the recent declines in used prices. Consequently, we forecast EBITDA margins to fall to 6%-7% in fiscal 2023 and 5%-6% in 2024. Notably, these forecasted margins are still higher than the 4%-...

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