‘The Real Deal’: Barclays Says These 3 Auto Dealer Stocks Look Attractive Right Now

Cars have been a foundational part of American life for more than a century, and despite shifts in technology and consumer habits, personal vehicles remain indispensable for most households. This demand supports a large and steadily expanding automotive dealership industry.

It’s no surprise, then, that Mordor Intelligence values the U.S. auto dealer market at about $2.95 trillion today and expects it to reach $3.68 trillion by 2030, a roughly 4.5% CAGR.

This resilient demand backdrop is exactly what informs Barclays analyst John Babcock’s positive view of the space.

“We are most constructive on the dealers, which have a track record of delivering consistently positive earnings and cash flow and strong shareholder returns. Dealers benefit from the stability of their Parts & Service business, which accounts for 40–45% of gross profit. While people may scale back on some repairs during a recession, they still need their vehicles operable. Dealers are also active with M&A as there is room for further consolidation in the industry. In addition to these points, valuations have gotten more favorable,” Babcock opined.

The Barclays analyst has gone on to pick out three auto dealer stocks that are attractive right now, and his comments make for interesting reading. We’ve opened up the TipRanks database to see the larger market view on his picks.

Group 1 Automotive (GPI)

The first stock on our list, Group 1 Automotive, is a major auto dealer franchise company in the US markets. Group 1 boasts 324 new vehicle franchises, 259 franchised new vehicle dealerships and generated $19.9 billion in revenue last year. The company’s dealerships sell 36 recognized automotive brands across the country.

In addition to its strong position as a dealer in new vehicles, Group 1 is also a leader in the aftermarket, or service and support, sales segment. The company operates sales facilities across the nation and ensures that they are well positioned to keep up with the increasing complexity of modern cars – and especially with the service demands of electric vehicles. The company’s success at this has led it to outperform its peer group in recent years.

Group 1 operates across much of the United States, but its footprint is particularly strong in the Northeast, the Southeast, Texas, and California. Texas, Florida, and the Gulf Coast are notable as regions that have led recent national economic growth statistics, and Group 1 boasts that it is the #1 auto retailer in Texas.

Among the car brands available through Group 1 are the major Detroit nameplates – think Ford, Buick, Chevy, and Dodge Ram – as well as such major imports as Nissan, Kia, Hyundai, Honda, and Mazda. A look at the company’s website shows that customers can search through more than 35,000 new cars for sale, along with nearly 14,000 used and certified used vehicles.

In its last reported quarter, 3Q25, Group 1 saw record-level quarterly revenues. The total came to $5.8 billion, up more than 10% year-over-year and beating the forecast by $111.78 million. At the bottom line, the company realized a non-GAAP EPS of $10.45; this was up 5.6% year-over-year, although it missed the forecast by 28 cents per share.

Checking in with the Barclays view, we find analyst Babcock optimistic on this company, seeing it with plenty of room to continue growing. He writes, “At 8.8x 1-year forward P/E on Street estimates, GPI is trading a bit below the dealer average and also lower than its historical average. We believe this creates an attractive entry point for GPI, which is one of the fastest growing dealers driven both by sizable investments in M&A and same-store sales growth for new and used vehicles that has been at the higher end of the dealers. GPI’s performance in the higher margin parts & service and finance & insurance businesses has also been above average. In addition to these points, we expect continued shareholder return through stock buybacks and growth in the dividend.”

Quantifying his stance on Group 1, Babcock puts an Overweight (i.e., Buy) rating on the shares, with a $510 price target that suggests a one-year gain for the stock of 30%. (To watch Babcock’s track record, click here)

GPI shares have a Moderate Buy consensus rating from the Street, based on 6 reviews that include 4 to Buy and 2 to Sell. The stock is priced at $391.91, and its $486 average target price implies it will gain 24% in the year ahead. (See GPI stock forecast)

Lithia Motors (LAD)

Next on our list of Barclays picks is Lithia, one of the three largest new vehicle automotive dealership groups in the US. The Oregon-based company has been in business since 1946 and today boasts some 450 dealer locations in the US, Canada, and the UK. Customers can find 52 automotive nameplates for sale in Lithia’s network – the company currently states that it has over 109,000 vehicles available in the US, more than 1,000 in Canada, and over 4,000 in the UK.

The company’s inventory includes over 72,000 new vehicles as well as more than 38,000 used cars. Models include SUVs, trucks, family cars, and electric vehicles – pretty much everything that’s on the market. Auto sales services are backed and supported by Lithia’s financing partners, and the company also maintains a network of service, repair, and parts centers.

Lithia has a strategic goal of expanding its luxury car services, and earlier this month the company announced its acquisition of two luxury dealerships in Southern California – Porsche Beverly Hills and Audi Santa Monica. Between them, these two dealerships generate $450 million in annual revenue.

In its third-quarter financial release this year, Lithia reported record-level Q3 revenue.The company’s top line was up 5% to $9.7 billion and beat the forecast by $183.8 million. Lithia’s non-GAAP earnings showed even stronger growth, rising 17% year-over-year to hit $9.50 per share.

Babcock, in his write-up for Barclays, explains why he believes that Lithia is likely to show continued acquisition growth in the long term and to bring additional gains to shareholders. The analyst says of the company, “LAD is one of the fastest growing dealers driven by its ongoing and significant investments in M&A. The stock is trading at a discount (at 7.8x P/E vs. historical average of 11.2x and dealer average of ~10x) and we expect it will re-rate… We expect the near-term pause in M&A presents an opportunity for LAD to put a greater focus on improving operations in the existing business, which could drive greater than expected efficiencies and better returns. This also will likely translate into more share buybacks, further pushing EPS higher. Ultimately, we expect M&A to remain a key part of LAD’s long-term growth story, and our industry discussions suggest private market valuations for dealers have already started to correct. Additionally, growth in the captive finance business will contribute over time as well.”

These comments support Babcock’s Overweight (i.e., Buy) rating here, while his $410 price target points toward share appreciation of 39.5% on the one-year horizon.

Lithia has earned a Strong Buy consensus rating from the Street’s analysts, based on 10 reviews with an 8-to-2 breakdown of Buy over Hold. The shares have a current trading price of $293.98 and an average target price of $380.11 that implies a 29% one-year gain. (See LAD stock forecast)

AutoNation (AN)

The last stock we’re looking at here is AutoNation, another of the perennially largest auto dealer networks in the country. As of September this year, AutoNation had 323 dealer locations in 134 cities across 20 states. Texas and Florida, among the fastest-growing state economies in the US, are each home to 65 of these dealerships, giving each state approximately one-fifth of the company’s network. California is next in line, with 43 AutoNation dealers.

These dealers have plenty of inventory on hand to support their operations. AutoNation has some 27,000 used vehicles on its books, as well as a 47-day supply of new vehicles, as of the end of Q3 this year. In the third quarter, AutoNation expanded its network through the acquisition of dealers under the Ford, Mazda, Audi, and Mercedes nameplates.

In addition to its car sales business, AutoNation also handles financing and after-sales services. The former, of course, assists customers in arranging auto loans; the latter encompasses repair and maintenance services. Altogether, these services – new and used vehicle sales, financing, and after-sales – further AutoNation’s company mission of making it easy, transparent, and personalized to get the right car.

Turning to the company’s financial side, we find that AutoNation reported $7.01 billion at the top line in 3Q25, for a 7% year-over-year gain and beating the estimates by $174.93 million. The company’s bottom line was reported as a non-GAAP EPS of $5.01, up 25% year-over-year and 16 cents per share better than had been anticipated.

For one last time, we’ll check in with Barclays analyst Babcock, who states clearly why he believes that this stock is one to back: “The company has a track record of consistent operating performance and has delivered organic growth above the peer average in recent years. Coupled with a favorable valuation, sizable shareholder returns that we expect will come in part through share buybacks, and investments in M&A, we think AN will outperform its peers.”

This stock gets an Overweight (i.e., Buy) rating from the Barclays expert, who also sets a $250 price target that indicates a 27% one-year gain in the offing.

All in all, AutoNation stock has 8 recent analyst reviews, including 6 to Buy and 2 to Hold, for a Strong Buy consensus rating. The stock’s $196.60 selling price and $241 average target price together suggest a 22.5% upside over the next 12 months. (See AN stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.