LAD - Morgan Stanley downgrades auto dealers as EVs threaten traditional model

Morgan Stanley downgrades its outlook on franchise automotive dealers as Q3 results overall surpassed consensus but the long-term dealer outlook remains uncertain. "Exiting COVID, we believe improved cost structures are discounted in dealer share prices, while long term risks from EVs and direct-to-consumer models are not," write analysts led by Adam Jonas. The firm is concerned that no start-up EV firms appear to use or plan to use the traditional franchise dealer model. Morgan Stanley currently does not rate any US franchise dealers as Overweight. Morgan Stanley downgrades both Penske Automotive Group (PAG -10.1%) and Sonic Automotive (SAH -8.2%) to Underweight from Equal-weight and lowers the price target on franchise dealers by an average of 12%. Price targets decreased: Penske Automotive (NYSE:PAG) - $90 from $98; Sonic Automotive (NYSE:SAH) - $40 from $55; Group 1 Automotive (GPI -6.2%) - $200 from $206; Lithia Motors (LAD -3.1%) - $303 from $335;

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Morgan Stanley downgrades auto dealers as EVs threaten traditional model