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Bear of the Day: AutoNation (AN)

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The risk of peak auto is lingering over the automakers right now. Some pent-up demand helped spike auto sales to multi-year highs but now with rates turning the corner and a glut of cars coming back on leases there is pressure on sales. As a result, analysts have becoming increasingly bearish on the industry as a whole.

Today’s Bear of the Day is in this industry under pressure, AutoNation (AN - Free Report) . AutoNation, Inc., through its subsidiaries, operates as an automotive retailer in the United States. The company operates in three segments: Domestic, Import, and Premium Luxury. It offers a range of automotive products and services, including new and used vehicles; and parts and services, such as automotive repair and maintenance services, and wholesale parts and collision services. The company also provides automotive finance and insurance products comprising vehicle services and other protection products, and arrangement of finance for vehicle purchases through third-party finance sources. As of December 31, 2016, it owned and operated 371 new vehicle franchises from 260 stores located primarily in metropolitan markets in the Sunbelt region of the United States.

AutoNation is a Zacks Rank #5 (Strong Sell) stock because of the bearish actions of analysts covering the stock. Over the last sixty days, seven analysts have dropped their earnings estimates for the current year while six have dropped their numbers for next year. The bearish attitude has dropped our Zacks Consensus Estimate for the current year from $4.01 to $3.90 while next year’s number has gone down from $4.46 to $4.17.

Shares of AN have come under pressure this year, running out of steam under $53 in late January. From that elevated level the stock came crashing down under $40. The good news is buyers stepped in to prop up the stock in the high $30s. The first bounce off the lows in April took the stock to the 50-day moving average before ultimately running out of steam at $45.35 in late April. Another retest of the lows was met with a bounce that ended at $43.13. With a firm bottom at $38.20 long-term shareholders should keep an eye on this level.

Investors looking for other stocks in the automotive industry are going to be hard-pressed to find ideas with favorable Zacks Ranks. The highest ranked stocks in the industry are Zacks Rank #3 (Hold) stocks Amercia’s Car-Mart (CRMT - Free Report) and Lithia Motors (LAD - Free Report) .

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