Auto retail stocks fall on Morgan Stanley bear
22 November 2021
Influential Morgan Stanley equity analyst Adam Jonas has released a research note expressing caution over auto retailers because direct-to-consumer sales from Tesla and other EV start-ups pose a threat “even bigger than the threat of electrification itself”.
Mr Jonas downgraded North America’s Penske and Sonic “as a reflection of secular industry headwinds despite peak earnings”.
The release of the bearish report hit stock prices on Wednesday with Penske falling 10.4%, Sonic down 8.6%, while Group 1 fell 11.5% and Auto Nation fell 9.7%.
The Morgan Stanley analyst said he was concerned about the pressure franchised retailers face as Tesla and other startup EV makers expand and grow direct-to-consumer vehicle sales.
The following day, a report from Truist Securities countered this view. It said the threat outlined by its competitor “is overblown with limited downside risk to earnings” – and the stock price fall represented a buying opportunity.
The direct-to-consumer model is not new, said Truist analyst Stephanie Moore, and it’s not mandatory for EVs to be sold in this way. Traditional automakers are already relying on dealers to sell their electric cars – and “EVs will also require education for buyers as well as parts and service provided by dealers”.
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