AutoNation, Inc. (AN)

We expect AutoNation to be hurt by a continuing weak new car market. The company is disproportionately exposed to Florida and California, states that will be hit the most by a slowing car market.

Moreover, the credit crisis in the U.S. led to a 22% decline in AutoNation's sales, followed by a 32% decline in net profits in the third quarter of 2008. AutoNation's higher debts and interest charges are also major causes of concern. Tight credit and a slumping U.S. demand are expected to continue to affect sales and thereby margins in the near term.

Should it happen, the bankruptcy of General Motors, one of the major customers, would largely affect the operations of AutoNation. As a result, we rate the shares a SELL with a target of $6.00.