LOTZ - Auto dealer stocks slide after Lithia Motors earnings

Lithia Motors’ ( NYSE: LAD ) post-earnings plunge is pulling many of its peers downward on Wednesday.

The over 5% dip for shares of the Oregon-based auto dealership group came despite a beat on top and bottom lines for earnings and confident comments from management. However, declining new auto sales and shrinking margins on used vehicles appeared to spook the market.

For example, CFRA analyst Garrett Nelson cut his rating on the stock from “Buy” to “Hold” and slashed his price target from $300 to just $115 as he expects the good times for auto dealers are coming to a close.

“Although LAD beat (as it usually does), the modest nature of the beat is likely to cause the stock to trade lower and the results should do little to help alleviate concerns that earnings are peaking and more difficult times are ahead for auto dealers as new vehicle sales slow and interest rates rise,” he explained.

In line with the broader expectations of turbulence for auto dealers, AutoNation ( NYSE: AN ) -3.32% , CarMax ( NYSE: KMX ) -1.1% , and Group 1 Automotive ( NYSE: GPI ) -4.26% all slid sharply in Wednesday’s trading as well.

Conversely, heavily-shorted online auto retailers Carvana ( CVNA ) +16.97% , CarLotz ( LOTZ ) +2.35% , and Vroom ( VRM ) +6.2% soared on the day. Carvana ( CVNA ) stock in particular has risen about 30%, bouncing amid broader market rallies that buoyed many of the market's most beaten down stocks.

Read more on major investors raising stakes in Carvana after a steep selloff in 2022 .

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