Sonic Automotive (SAH) AI Stock Analysis

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Sonic Automotive

(NYSE:SAH)

Rating:68Neutral

Price Target:―

Sonic Automotive's overall stock score is 68, reflecting its robust revenue growth and strategic initiatives, particularly in the EchoPark segment. The company's high leverage and bearish technical indicators are key risks. However, its potential undervaluation and dividend yield provide a balanced investment proposition. Continued strategic focus and operational efficiency will be critical for maintaining momentum.

Positive Factors

Analyst rating

Analysts reiterate a Buy rating for the stock.

Echo Park segment

The Echo Park segment is showing encouraging results and maintaining unit guidance growth despite elevated uncertainty.

Used auto market

There is a positive risk/reward skew in the used auto market.

Negative Factors

Echo Park performance

SAH printed a weaker than expected performance for their Echo Park segment.

Regulatory headwinds

Regulatory headwinds from new vehicle tariffs are driving elevated uncertainty and potentially dampening unit enthusiasm.

Target price adjustment

Recent readings in the Echo Park inventory tracker have led to a lower target price.

Sonic Automotive (SAH) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$2.28B

Dividend Yield1.93%

Average Volume (3M)221.51K

Price to Earnings (P/E)9.6

Beta (1Y)0.95

Revenue Growth1.59%

EPS Growth43.91%

CountryUS

Employees10,800

SectorConsumer Cyclical

Sector Strength76

IndustryAuto - Dealerships

Share Statistics

EPS (TTM)1.48

Shares Outstanding21,931,620

10 Day Avg. Volume172,827

30 Day Avg. Volume221,508

Financial Highlights & Ratios

PEG Ratio0.67

Price to Book (P/B)2.02

Price to Sales (P/S)0.00

P/FCF Ratio70.18

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$68.00

Price Target Upside1.28% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering6

Sonic Automotive Business Overview & Revenue Model

Company DescriptionSonic Automotive, Inc. (SAH) is a Fortune 500 company and one of the largest automotive retailers in the United States. The company operates through a network of dealerships that provide a comprehensive range of automotive services, including the sale of new and used vehicles, vehicle maintenance and repair, and the sale of replacement parts. Sonic Automotive's operations are divided into two main segments: Franchised Dealerships and EchoPark Automotive, which focuses on pre-owned vehicle sales. With a focus on delivering exceptional customer service and leveraging technological advancements, Sonic Automotive aims to provide a seamless and satisfying car buying experience.

How the Company Makes MoneySonic Automotive generates revenue through several key streams. The primary source of income is the sale of new and used vehicles across its network of franchised dealerships and EchoPark locations. In addition to vehicle sales, the company earns significant revenue from its service and parts operations, which provide maintenance and repair services as well as replacement parts to customers. Financial services, including the arrangement of vehicle financing, insurance products, and extended service contracts, also contribute to the company's earnings. Partnerships with automotive manufacturers, financial institutions, and other service providers enhance Sonic Automotive's ability to offer competitive financing and insurance options, supporting its overall revenue generation strategy.

Sonic Automotive Financial Statement Overview

Summary

Sonic Automotive has demonstrated strong revenue growth, particularly in the EchoPark segment, and improved cash flow management. However, the high leverage and declining profit margins pose potential risks, necessitating a focus on operational efficiency and debt management.

Income Statement

Positive

Sonic Automotive shows strong revenue growth, with a notable increase of approximately 48% from 2020 to 2025. The gross profit margin remains stable, indicating efficient cost management despite fluctuations. However, the net profit margin and EBIT margin have decreased over the years, suggesting potential challenges in managing operational expenses or changes in market conditions.

Balance Sheet

Neutral

The company's debt-to-equity ratio indicates high leverage, which could pose risks if market conditions worsen. There is a positive trend in stockholders' equity, but the equity ratio remains relatively low, reflecting a high reliance on debt financing. Return on equity has improved, demonstrating more effective use of equity capital in generating profits.

Cash Flow

Positive

Sonic Automotive has shown significant improvement in free cash flow from 2024 to 2025, moving from negative to positive, indicating better cash management. The operating cash flow to net income ratio is strong, suggesting effective cash conversion. However, the free cash flow to net income ratio tends to fluctuate, which could impact long-term financial stability.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
14.49B	14.22B	14.37B	14.00B	12.40B	9.77B
	Gross Profit
2.19B	2.19B	2.25B	2.32B	1.91B	1.42B
	EBIT
501.20M	461.50M	423.60M	634.60M	538.40M	304.05M
	EBITDA
649.70M	605.10M	558.60M	441.00M	622.50M	125.40M
	Net Income Common Stockholders
244.60M	216.00M	178.20M	88.50M	348.90M	-50.66M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
64.60M	44.00M	28.90M	229.20M	299.40M	170.31M
	Total Assets
5.88B	5.90B	5.36B	4.98B	4.98B	3.75B
	Total Debt
4.05B	4.13B	3.86B	3.49B	3.32B	2.45B
	Net Debt
3.99B	4.08B	3.83B	3.26B	3.02B	2.28B
	Total Liabilities
4.78B	4.83B	4.47B	4.08B	3.90B	2.93B
	Stockholders Equity
1.09B	1.06B	891.90M	895.20M	1.08B	814.80M
Cash Flow		Free Cash Flow
31.40M	-78.10M	-219.30M	179.00M	8.10M	153.90M
	Operating Cash Flow
219.90M	109.20M	-15.70M	406.10M	306.30M	281.08M
	Investing Cash Flow
-174.40M	-178.30M	-218.70M	-299.70M	-1.30B	-100.18M
	Financing Cash Flow
-300.00K	84.30M	34.10M	-176.60M	624.80M	-39.69M

Sonic Automotive Technical Analysis

Technical Analysis Sentiment

Positive

Last Price67.14

Price Trends

50DMA

61.68

Positive

100DMA

65.10

Positive

200DMA

62.54

Positive

Market Momentum

MACD

1.88

Negative

RSI

59.31

Neutral

STOCH

28.20

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SAH, the sentiment is Positive. The current price of 67.14 is above the 20-day moving average (MA) of 65.47, above the 50-day MA of 61.68, and above the 200-day MA of 62.54, indicating a bullish trend. The MACD of 1.88 indicates Negative momentum. The RSI at 59.31 is Neutral, neither overbought nor oversold. The STOCH value of 28.20 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SAH.

Sonic Automotive Risk Analysis

Sonic Automotive disclosed 36 risk factors in its most recent earnings report. Sonic Automotive reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Sonic Automotive Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PAG	77 Outperform	$10.73B	11.43	18.57%	2.73%	3.29%	-1.29%
GPI	76 Outperform	$5.52B	12.02	16.25%	0.45%	15.13%	-15.98%
LAD	75 Outperform	$8.11B	9.81	12.95%	0.69%	12.96%	-6.25%
ABG	72 Outperform	$4.43B	10.72	11.92%	―	11.11%	-23.41%
AN	72 Outperform	$6.87B	10.78	28.45%	―	-0.24%	-19.76%
SAH	68 Neutral	$2.28B	9.58	24.52%	1.93%	1.59%	43.91%
Sector *	62 Neutral	$6.84B	11.22	2.83%	3.93%	2.65%	-21.93%

* Consumer Cyclical Sector Average

Performance Comparison

SAH

Sonic Automotive

67.14

11.77

21.26%

ABG

Asbury

225.19

-6.11

-2.64%

AutoNation

182.21

12.47

7.35%

GPI

Group 1 Automotive

425.94

119.39

38.95%

LAD

Lithia Motors

311.45

56.85

22.33%

PAG

Penske Automotive Group

162.17

12.72

8.51%

Sonic Automotive Earnings Call Summary

Earnings Call Date:Apr 24, 2025

(Q1-2025)

% Change Since: 13.74%|

Next Earnings Date:Jul 24, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted strong revenue growth, particularly in the EchoPark segment, and a robust balance sheet. However, challenges such as a decrease in used vehicle volume, tariff impacts, and an unfavorable warranty versus customer pay mix were noted. The sentiment reflects a balanced view of positive achievements and challenges faced.

Q1-2025 Updates

Positive Updates

Record First Quarter Revenues and Growth

First quarter consolidated total revenues increased by 8% year over year, setting a record for the first quarter. Consolidated gross profit grew by 6%, and consolidated adjusted EBITDA increased by 7%.

Franchised Dealership Segment Success

Franchised dealership segment achieved record revenues of $3.1 billion, up 9% year over year, driven by an 11% increase in new retail volume and a 6% increase in fixed operations revenues.

EchoPark Segment Achievements

EchoPark segment income reached an all-time quarterly record of $10.3 million, with adjusted EBITDA at a record $15.8 million, up 116% year over year. EchoPark segment total gross profit per unit was an all-time record of $3,411 per unit.

Strong Balance Sheet and Liquidity

The company ended the quarter with $947 million in available liquidity, including $430 million in combined cash and floor plan deposits.

Dividend Approval

Board of Directors approved a quarterly cash dividend of $0.35 per share, payable on July 15, 2025.

Negative Updates

Challenges with Used Vehicle Volume

Same-store used vehicle volume decreased by 2% year over year, primarily due to lower levels of late-model used vehicles and consumer affordability challenges.

Impact of Tariffs and Market Uncertainty

Concerns regarding the effects of tariffs on the automotive industry, affecting vehicle affordability and consumer demand, causing the company to update or withdraw certain financial guidance items.

Warranty vs. Customer Pay Mix

A significant mix of warranty work over customer pay in fixed operations, with 40% warranty growth versus 2-3% customer pay growth, not ideal for the company.

Company Guidance

In the first quarter of 2025, Sonic Automotive reported a GAAP EPS of $2.04 per share, with an adjusted EPS of $1.48, marking a 9% increase year over year. The company's consolidated total revenues reached a first-quarter record with an 8% increase, while consolidated gross profit and adjusted EBITDA rose by 6% and 7%, respectively. The franchised dealership segment achieved record revenues of $3.1 billion, driven by an 11% increase in new retail volume and a 6% rise in fixed operations revenues. However, same-store used vehicle volume declined by 2% due to affordability challenges, though same-store used GPU increased to $1,555 per unit. The EchoPark segment recorded an all-time high segment income of $10.3 million and an adjusted EBITDA of $15.8 million, up 116% from the previous year, with total gross profit per unit hitting a record $3,411. The Power Sports segment generated first-quarter revenues of $34.4 million, with a gross profit of $8.5 million, despite a segment adjusted EBITDA loss of $700,000. The company ended the quarter with $947 million in available liquidity and announced a quarterly cash dividend of $0.35 per share. Due to uncertainties surrounding tariff impacts, Sonic Automotive adjusted its 2025 financial guidance but remains committed to strategic growth and long-term value creation for shareholders.

Sonic Automotive Corporate Events

Business Operations and StrategyFinancial Disclosures

Sonic Automotive Reports Strong Q1 2025 Financial Performance

Positive

Apr 24, 2025

On April 24, 2025, Sonic Automotive reported a strong financial performance for the first quarter of 2025, with record revenues of $3.7 billion, an 8% increase year-over-year, and a significant rise in net income by 68% to $70.6 million. The EchoPark segment achieved all-time record gross profit and segment income, marking a 455% improvement from the previous year. Despite uncertainties related to tariffs, Sonic Automotive remains focused on expanding its market share and optimizing its operations to sustain long-term growth and shareholder value.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.