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4 Auto Retail Stocks to Buy as Digitization and M&A Fuel Growth
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Sales of new vehicles remained strong in the third quarter of 2025, primarily led by robust electric vehicle (EV) sales. However, affordability issues and the expiration of EV tax credits could impact near-term demand and sales volumes. That said, the Fed’s rate cuts are expected to gradually lower auto financing costs, offering some relief to buyers and retailers alike. Meanwhile, continued digitization, strategic buyouts, efficient cost management, and shareholder-friendly actions are helping leading players sustain competitiveness amid evolving market conditions and a shifting consumer landscape.
The auto retail and wholesale industry plays a key role in how cars, trucks, and auto parts reach consumers. Companies in this space operate through dealership networks and retail chains, selling both new and used vehicles, offering repair and maintenance services, and helping customers with financing. Since this is a consumer-driven industry, its performance often depends on how strong the economy is. When people have more disposable income, they're more likely to spend on vehicles. But during tougher times, like economic slowdowns, big purchases are often put on hold. The COVID-19 pandemic changed the way the industry works, pushing dealers to focus more on online tools and e-commerce. That digital shift is expected to continue, shaping how vehicles are bought and sold in the future.
Key Themes Shaping the Industry
Vehicle Sales Expected to Soften: U.S. auto sales were strong in the third quarter of 2025, largely supported by a surge in battery electric vehicle (BEV) purchases before the Sept. 30 expiration of federal EV incentives. Automakers also managed U.S. tariffs better than expected, cushioning potential disruptions. However, the momentum is likely to fade as EV-related demand cools and affordability issues weigh on consumers. With average vehicle prices remaining high, many potential buyers may delay purchases, leading to softer sales volumes for auto retailers in the near term.
Fed Rate Cuts May Offer Some Respite: The U.S. Federal Reserve cut interest rates by 25 basis points in September 2025, marking the first cut of the year and signaling a shift toward monetary easing. The Fed is expected to reduce rates further in October and December, which could eventually lower auto loan costs. While the September cut hasn’t yet translated into cheaper auto financing, continued easing would help offset affordability challenges. This is particularly important as new vehicle prices now exceed $50,000 on average, per Cox Automotive. Lower borrowing costs could bring buyers back into the market and offer some relief to auto retailers in the coming months.
Strategic Buyouts Expanding Market Reach: Auto retailers are pursuing acquisitions to grow their footprint and strengthen competitive positioning. By acquiring dealerships in new regions, they can diversify their brand portfolios, attract a broader customer base and enhance after-sales service capabilities. These moves also help retailers achieve economies of scale and improve operational efficiency.
Digitization Enhancing Customer Experience: Dealers are investing heavily in digital platforms to enable a seamless buying journey—from virtual showrooms and price transparency tools to online trade-in options. The move toward digitization is broadening customer reach, driving satisfaction and improving margins—key factors that are helping traditional auto retailers stay competitive in an increasingly tech-savvy market.
Investor-Friendly Moves: Several auto retailers remain committed to rewarding shareholders through buybacks and dividend hikes. Healthy cash flow generation—fueled by acquisitions, store expansions, and cost-efficiency programs—has enabled many to maintain robust capital return policies.
Zacks Industry Rank Solid
The Zacks Auto Retail & Wholesale industry is part of the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #18, which places it in the top 7% of around 245 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.
We will present a few stocks that you might consider adding to your portfolio. Before that, let’s discuss the industry’s recent stock market performance and valuation picture.
Industry Lags Sector and S&P 500
The Zacks Auto Retail & Whole Sales industry has underperformed the Zacks S&P 500 composite as well as the Auto, Tires and Truck sector over the past year. The industry has returned 8.2% over this period compared with the S&P 500’s growth of 14.7% and the sector's 40.8%.
One-Year Price Performance
Industry's Current Valuation
Since automotive companies are debt-laden, it makes sense to value them based on the enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio.
On the basis of the trailing 12-month EV/EBITDA, the industry is currently trading at 8.5X compared with the S&P 500’s 18.12X and the sector’s trailing 12-month EV/EBITDA of 22.41X.
Over the past five years, the industry has traded as high as 10.79X, as low as 4.78X and at a median of 7.21X, as the chart below shows.
EV/EBITDA Ratio (Past 5 Years)
4 Stocks to Buy
Asbury is growing rapidly through acquisitions and digital innovation. Its Clicklane e-commerce platform is driving online sales momentum. The company has expanded through major deals, including Larry H. Miller Dealerships, Total Care Auto and Jim Koons, each contributing significantly to revenues. The July 2025 acquisition of The Herb Chambers Companies (HCC) is expected to add around $3 billion in annualized sales.
Asbury is also implementing Tekion’s Automotive Retail Cloud to streamline operations and improve margins. This digital transition could enhance customer experience and efficiency. With multiple revenue streams and strong integration of recent deals, Asbury is well-positioned for sustained top-line growth.
Asbury currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for ABG’s 2025 and 2026 sales implies year-over-year growth of 5% and 7.5%, respectively.
Sonic’s business is balanced across new and used vehicle sales, high-margin parts and services, and finance/insurance (F&I) operations, supporting steady profitability. Its EchoPark used car segment is a major growth engine, leveraging data-driven inventory and process improvements to capitalize on used vehicle demand.
In the second quarter of 2025, Sonic acquired four Jaguar and Land Rover dealerships in California. The acquisition is expected to add about $500 million in annual revenues and strengthen its luxury portfolio. Sonic’s shareholder returns remain strong, with seven dividend hikes in the past five years and a 31% annualized dividend growth rate.
Sonic currently carries a Zacks Rank #1. The Zacks Consensus Estimate for SAH’s 2025 sales and EPS implies year-over-year growth of 4% and 29%, respectively.
Price & Consensus: SAH
Penske is a global auto and commercial truck dealer operating across the United States, the U.K., Canada, Germany, Italy and Japan. The company has been expanding rapidly, completing 2024 acquisitions worth nearly $2.1 billion in annualized revenues. Its Premier Truck Group, with 45 North American locations, supports diversification and steady growth.
Penske’s balance sheet is strong, with a low debt-to-capital ratio of 14% versus the industry’s 23%, and liquidity of $2.3 billion at the end of the second quarter of 2025. This gives it ample flexibility for acquisitions and service expansion. In July, the company raised its dividend by 3.3%, marking its 19th straight quarterly increase—signaling consistent financial strength and shareholder commitment.
Penske currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for PAG’s 2025 sales and EPS implies year-over-year growth of 1% and 4%, respectively.
Price & Consensus: PAG
AutoNation benefits from a diversified revenue base across new and used vehicle sales, parts and services, and finance operations. The company continues to expand through acquisitions, strengthening its position in key U.S. markets. In September 2025, it bought two luxury dealerships in Chicago, adding $325 million in annual revenues and bringing its local presence to 10 locations. In March, it acquired two Denver-area dealerships.
AutoNation is also boosting its digital capabilities through AutoNation Express and a minority stake in TrueCar. These initiatives enhance its online retailing platform, strengthen customer engagement and position the company well for future growth.
AutoNation currently carries a Zacks Rank #2. The Zacks Consensus Estimate for AN’s 2025 sales and EPS implies year-over-year growth of 3% and 13%, respectively.
Price & Consensus: AN
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4 Auto Retail Stocks to Buy as Digitization and M&A Fuel Growth
Sales of new vehicles remained strong in the third quarter of 2025, primarily led by robust electric vehicle (EV) sales. However, affordability issues and the expiration of EV tax credits could impact near-term demand and sales volumes. That said, the Fed’s rate cuts are expected to gradually lower auto financing costs, offering some relief to buyers and retailers alike. Meanwhile, continued digitization, strategic buyouts, efficient cost management, and shareholder-friendly actions are helping leading players sustain competitiveness amid evolving market conditions and a shifting consumer landscape.
Penske Automotive (PAG - Free Report) , AutoNation Inc. (AN - Free Report) , Asbury Automotive (ABG - Free Report) and Sonic Automotive (SAH - Free Report) are good investment options in the auto retail space.
Industry Overview
The auto retail and wholesale industry plays a key role in how cars, trucks, and auto parts reach consumers. Companies in this space operate through dealership networks and retail chains, selling both new and used vehicles, offering repair and maintenance services, and helping customers with financing. Since this is a consumer-driven industry, its performance often depends on how strong the economy is. When people have more disposable income, they're more likely to spend on vehicles. But during tougher times, like economic slowdowns, big purchases are often put on hold. The COVID-19 pandemic changed the way the industry works, pushing dealers to focus more on online tools and e-commerce. That digital shift is expected to continue, shaping how vehicles are bought and sold in the future.
Key Themes Shaping the Industry
Vehicle Sales Expected to Soften: U.S. auto sales were strong in the third quarter of 2025, largely supported by a surge in battery electric vehicle (BEV) purchases before the Sept. 30 expiration of federal EV incentives. Automakers also managed U.S. tariffs better than expected, cushioning potential disruptions. However, the momentum is likely to fade as EV-related demand cools and affordability issues weigh on consumers. With average vehicle prices remaining high, many potential buyers may delay purchases, leading to softer sales volumes for auto retailers in the near term.
Fed Rate Cuts May Offer Some Respite: The U.S. Federal Reserve cut interest rates by 25 basis points in September 2025, marking the first cut of the year and signaling a shift toward monetary easing. The Fed is expected to reduce rates further in October and December, which could eventually lower auto loan costs. While the September cut hasn’t yet translated into cheaper auto financing, continued easing would help offset affordability challenges. This is particularly important as new vehicle prices now exceed $50,000 on average, per Cox Automotive. Lower borrowing costs could bring buyers back into the market and offer some relief to auto retailers in the coming months.
Strategic Buyouts Expanding Market Reach: Auto retailers are pursuing acquisitions to grow their footprint and strengthen competitive positioning. By acquiring dealerships in new regions, they can diversify their brand portfolios, attract a broader customer base and enhance after-sales service capabilities. These moves also help retailers achieve economies of scale and improve operational efficiency.
Digitization Enhancing Customer Experience: Dealers are investing heavily in digital platforms to enable a seamless buying journey—from virtual showrooms and price transparency tools to online trade-in options. The move toward digitization is broadening customer reach, driving satisfaction and improving margins—key factors that are helping traditional auto retailers stay competitive in an increasingly tech-savvy market.
Investor-Friendly Moves: Several auto retailers remain committed to rewarding shareholders through buybacks and dividend hikes. Healthy cash flow generation—fueled by acquisitions, store expansions, and cost-efficiency programs—has enabled many to maintain robust capital return policies.
Zacks Industry Rank Solid
The Zacks Auto Retail & Wholesale industry is part of the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #18, which places it in the top 7% of around 245 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.
We will present a few stocks that you might consider adding to your portfolio. Before that, let’s discuss the industry’s recent stock market performance and valuation picture.
Industry Lags Sector and S&P 500
The Zacks Auto Retail & Whole Sales industry has underperformed the Zacks S&P 500 composite as well as the Auto, Tires and Truck sector over the past year. The industry has returned 8.2% over this period compared with the S&P 500’s growth of 14.7% and the sector's 40.8%.
One-Year Price Performance
Industry's Current Valuation
Since automotive companies are debt-laden, it makes sense to value them based on the enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio.
On the basis of the trailing 12-month EV/EBITDA, the industry is currently trading at 8.5X compared with the S&P 500’s 18.12X and the sector’s trailing 12-month EV/EBITDA of 22.41X.
Over the past five years, the industry has traded as high as 10.79X, as low as 4.78X and at a median of 7.21X, as the chart below shows.
EV/EBITDA Ratio (Past 5 Years)
4 Stocks to Buy
Asbury is growing rapidly through acquisitions and digital innovation. Its Clicklane e-commerce platform is driving online sales momentum. The company has expanded through major deals, including Larry H. Miller Dealerships, Total Care Auto and Jim Koons, each contributing significantly to revenues. The July 2025 acquisition of The Herb Chambers Companies (HCC) is expected to add around $3 billion in annualized sales.
Asbury is also implementing Tekion’s Automotive Retail Cloud to streamline operations and improve margins. This digital transition could enhance customer experience and efficiency. With multiple revenue streams and strong integration of recent deals, Asbury is well-positioned for sustained top-line growth.
Asbury currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for ABG’s 2025 and 2026 sales implies year-over-year growth of 5% and 7.5%, respectively.
Price & Consensus: ABG
You can see the complete list of today’s Zacks #1 Rank stocks here.
Sonic’s business is balanced across new and used vehicle sales, high-margin parts and services, and finance/insurance (F&I) operations, supporting steady profitability. Its EchoPark used car segment is a major growth engine, leveraging data-driven inventory and process improvements to capitalize on used vehicle demand.
In the second quarter of 2025, Sonic acquired four Jaguar and Land Rover dealerships in California. The acquisition is expected to add about $500 million in annual revenues and strengthen its luxury portfolio. Sonic’s shareholder returns remain strong, with seven dividend hikes in the past five years and a 31% annualized dividend growth rate.
Sonic currently carries a Zacks Rank #1. The Zacks Consensus Estimate for SAH’s 2025 sales and EPS implies year-over-year growth of 4% and 29%, respectively.
Price & Consensus: SAH
Penske is a global auto and commercial truck dealer operating across the United States, the U.K., Canada, Germany, Italy and Japan. The company has been expanding rapidly, completing 2024 acquisitions worth nearly $2.1 billion in annualized revenues. Its Premier Truck Group, with 45 North American locations, supports diversification and steady growth.
Penske’s balance sheet is strong, with a low debt-to-capital ratio of 14% versus the industry’s 23%, and liquidity of $2.3 billion at the end of the second quarter of 2025. This gives it ample flexibility for acquisitions and service expansion. In July, the company raised its dividend by 3.3%, marking its 19th straight quarterly increase—signaling consistent financial strength and shareholder commitment.
Penske currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for PAG’s 2025 sales and EPS implies year-over-year growth of 1% and 4%, respectively.
Price & Consensus: PAG
AutoNation benefits from a diversified revenue base across new and used vehicle sales, parts and services, and finance operations. The company continues to expand through acquisitions, strengthening its position in key U.S. markets. In September 2025, it bought two luxury dealerships in Chicago, adding $325 million in annual revenues and bringing its local presence to 10 locations. In March, it acquired two Denver-area dealerships.
AutoNation is also boosting its digital capabilities through AutoNation Express and a minority stake in TrueCar. These initiatives enhance its online retailing platform, strengthen customer engagement and position the company well for future growth.
AutoNation currently carries a Zacks Rank #2. The Zacks Consensus Estimate for AN’s 2025 sales and EPS implies year-over-year growth of 3% and 13%, respectively.
Price & Consensus: AN