AutoNation Extends Breakout Amid Continued Expansion

AutoNation, Inc. (AN) shares rose more than 6% during Thursday’s session after the company reported better-than-expected financial results. Revenue fell 15.3% to $4.53 billion during the second quarter, beating consensus estimates by $440 million, while non-GAAP earnings per share came in at $1.41, beating consensus estimates by $1.04 per share. Same-store new vehicle sales fell 17.1%, while same-store used vehicle sales fell 2.4% during the quarter. Selling, general, and administrative expense (SG&A) remained near its target rate of 69% of gross profit.

Despite the worsening pandemic in the United States, AutoNation confirmed that it’s still planning on building more standalone pre-owned vehicle sales and service centers and at least 20 additional stores over the next three years. The company is also continuing to build out its digital capabilities to adjust to shifting consumer behaviors throughout the pandemic.

The move higher for AutoNation comes after Lithia Motors, Inc. (LAD), one of the largest automotive group retailers in the United States, reported its highest ever earnings per share on July 22 and pointed to a strong sequential improvement during the second quarter.

From a technical standpoint, AutoNation stock moved toward trendline resistance at $56.50. The relative strength index (RSI) rose further into overbought territory with a reading of 80.81, but the moving average convergence divergence (MACD) continued its bullish crossover. These indicators suggest that the stock could see some near-term consolidation before resuming its larger trend higher.

Traders should watch for consolidation between trendline resistance at $56.50 and trendline support near $45.00 over the coming sessions. If the stock breaks out, traders could see a move to fresh highs. If the stock breaks down, traders could see a move toward the 50-day moving average at $42.62 or the 200-day moving average at about $40.30, although that seems less likely to occur.

The author holds no position in the stock(s) mentioned except through passively managed index funds.