- Price
- $159.80
- Fair value
- $238.00
- Discount
- 32.9%
- Uncertainty
- High
- LSEG rating
- 1.93
- Moat
- Narrow
- Next earnings
- 2026-10-30
- Next earnings is estimate
- Yes
- Company name
- AutoNation
- Sector
- Auto dealerships
- About
- AutoNation is one of the largest car dealer groups in the United States. It sells new and used vehicles through a national network of dealerships, grouped in Domestic, Import and Premium Luxury segments. It repairs and services vehicles and sells parts, which it calls After-Sales. It earns fees when it arranges vehicle loans and sells add-on products such as service contracts. Through AutoNation Finance, it also makes auto loans itself and funds them mostly with non-recourse debt. Most profit comes from After-Sales and from finance and insurance, because vehicle sales earn low margins. Bill Gates's Cascade Investment owns about one fifth of the shares.
- Thesis
- The market prices AutoNation as a dealer whose profits passed their peak. Vehicle profits fall while unit sales fall, and earnings per share grow mainly because the company buys back shares. In Q2 2026, same-store new vehicle unit sales fell 5% and used unit sales fell 8% from a year earlier. New vehicle gross profit fell 18%, and adjusted operating income fell 7%. Adjusted EPS still rose 2%, because the diluted share count was 12% lower. AutoNation also grows its own loan book, which adds credit risk. For the gap to close, four things must be true. Same-store unit sales must stop falling. After-Sales gross profit must keep growing, as it did with record results in Q2 2026 and 7% customer pay growth. AutoNation Finance must keep growing its profit while credit losses stay stable. The covenant leverage ratio must stay near 2.8 times or lower while buybacks continue. The first evidence comes with the Q3 2026 report, estimated for about October 30, 2026, and then with the Q4 2026 report in early 2027. The gap depends on the vehicle cycle and on interest rates, so it can close only slowly, over the next two to three years. The main reason it may not close is a longer fall in vehicle demand and dealer margins.
- Risks
- Vehicle unit sales and margins fall. In the first half of 2026, same-store new vehicle unit sales fell 7% and used unit sales fell 6% from a year earlier. In Q2 2026, new vehicle gross profit fell 18%. If demand stays weak, profits from vehicles can fall further.
AutoNation Finance adds credit risk. Auto loans receivable rose to $2.59 billion at June 30, 2026, from $2.14 billion at December 31, 2025, and the provision for credit losses was $40 million in the first half of 2026. Higher loan losses in a weak economy would reduce profit.
Debt and interest costs rose. Non-vehicle debt was $4.43 billion at June 30, 2026, up from $3.98 billion at December 31, 2025, and included $635 million of commercial paper. Floor plan notes for vehicle inventory were another $4.06 billion. Higher interest rates raise these costs.
Cascade Investment owns 21.1% of the shares. One large holder can influence votes, and a large sale of shares could weigh on the price.
- Balance sheet
- Cash: $53M
Debt: $4.4B
Net debt: $4.4B
Net debt / EBITDA: 2.7× (medium)
Interest cover: 6.5×
Debt due within 12 months: $710M
AutoNation funds its vehicle inventory with floor plan notes and funds the rest of the business with senior notes, commercial paper and a revolving credit facility. At June 30, 2026, non-vehicle debt was $4.43 billion: $3.72 billion of long-term debt, $75 million of current maturities and $635 million of commercial paper with a weighted average rate of 4.1%. Floor plan notes payable of $4.06 billion and $2.42 billion of non-recourse debt that funds AutoNation Finance loans are left out of debt. Liquidity was $1.0 billion, with $53 million of cash and $0.9 billion available on the revolver after commercial paper. The net leverage figure is the covenant leverage ratio net of cash, 2.7 times at June 30, 2026; the covenant limit is 3.75 times. Interest cover is operating income divided by other interest expense for the first half of 2026, without floor plan interest and AutoNation Finance interest. The covenant interest coverage ratio was 4.67 times. On September 14, 2026, AutoNation raised its revolver to $2.0 billion and extended it to September 2031.
As of 2026-06-30.
- Checkpoints
- Oct 30, 2026 (estimate): Q3 2026 earnings: unit sales and vehicle margins. Pending. Watch: A smaller fall in same-store new and used unit sales than in Q2 2026 and growth in After-Sales gross profit pass; a larger fall in units or in adjusted operating income fails.
Feb 15, 2027 (estimate): Q4 2026 earnings: AutoNation Finance and leverage. Pending. Watch: AutoNation Finance profit that keeps growing with stable credit losses, and covenant leverage at or below 2.8 times, pass; higher credit losses or rising leverage fails.
- Recent events
- 2026-09-14: AutoNation amended its unsecured credit agreement. The revolving credit facility rose to $2.0 billion from $1.9 billion, the accordion rose to $1.0 billion, and the maturity moved to September 14, 2031. The covenants stay at a maximum leverage ratio of 3.75 times and a minimum interest coverage ratio of 3.00 times.
2026-07-31: AutoNation reported Q2 2026 results. Revenue fell 1% to $6.9 billion. EPS was $5.39, and adjusted EPS was $5.56 against $5.46 a year earlier. Same-store new vehicle unit sales fell 5% and used unit sales fell 8%. After-Sales gross profit was a record, and the AutoNation Finance loan portfolio grew to $2.7 billion. In June, AutoNation bought a Toyota store near Atlanta and three Premium Luxury stores in the San Francisco Bay area, with about $600 million of annual revenue.
2026-05-05: Cascade Investment, controlled by Bill Gates, reported that it owns 7.06 million AutoNation shares, or 21.1% of the shares. The percentage rose because AutoNation's buybacks reduced the share count, not because Cascade bought shares.
2026-05-01: AutoNation reported Q1 2026 results. Revenue fell 2% to $6.6 billion. EPS was $5.85, and adjusted EPS was $4.69 against $4.68 a year earlier. AutoNation bought back shares for $300 million in the quarter, about 4% of the share count.