AutoCanada’s Cost Management Success Amid Macroeconomic Uncertainty Justifies Hold Rating

Analyst Tamy Chen of BMO Capital reiterated a Hold rating on AutoCanada (ACQ – Research Report), with a price target of C$20.00.

Tamy Chen has given her Hold rating due to a combination of factors surrounding AutoCanada’s recent performance and future outlook. The company has shown a notable improvement in operational expenses, leading to a stronger-than-expected EBITDA for the first quarter of 2025. This improvement is attributed to the company’s accelerated progress on its cost-saving initiatives, which have been implemented across more stores than initially anticipated. However, while these cost reductions are promising, there remains a degree of uncertainty regarding the broader macroeconomic environment.
Despite the positive strides in cost management, there are concerns about vehicle demand, which has shown signs of softening. Although the first quarter volumes were better than expected, there is an observed slowdown in demand as of May. Additionally, AutoCanada’s valuation appears reasonable if the company can achieve its cost reduction target by the end of 2025. Nonetheless, the macroeconomic uncertainties present a challenge, which justifies the Hold rating as the company navigates these mixed signals in the market.