The Eagers Automotive Ltd (ASX: APE) share price is rebounding from an early morning selloff, currently up 0.45% in afternoon trading to a price of $13.38.
That mirrors the action on the broader S&P/ASX 200 Index (ASX: XJO), which was down over 1.3% in morning trade but has now inched into the green.
A range of analysts, however, believe that Eagers is set to handily outperform the ASX 200 in 2021.
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The upside case for Eagers Automotive shareholders
In case you're unfamiliar, Eagers Automotive is Australia's oldest listed automotive retail group. It operates new and used car, truck and bus dealerships across the country, claiming 224 showrooms and an 11% market share of new vehicle sales. The company took on its new name in 2019, when AP Eagers merged with the formerly ASX-listed Automotive Holdings Group.
UBS analyst Tom Godfrey is among the analysts who are bullish on Eagers Automotive shares. As the Australian Financial Review reports, Godfrey has a 'buy' rating on Eagers' shares with a 12-month price target of $15. He pointed to December's new vehicle sales – up 14% year-on-year – as a sign of continuing momentum in the industry.
Godfrey's optimistic views on the company are backed by Bell Potter analyst Chris Savage. Savage also has a 'buy' rating on Eagers' shares with a 12-month price target of $15.50.
Most bullish of all is Morgan Stanley. The broker has an 'overweight' recommendation on Eagers' shares and a 12-month price target of $17, writing:
APE positively surprised, upgrading 2020 underlying PBT [profit before tax] to A$209.4m, up from A$195-205m PBT guidance in mid-Dec 2020. We recently highlighted APE as a key pick into Feb, offering the best potential for raising expectations in 2021.
Morgan Stanley's 12-month target is 27.6% above the current price of $13.32 per share.
There also looks to be some large upside potential in the used car market. As the AFR notes, Eagers Automotive CEO Martin Ward is revamping the company's used car sales approach.
According to the company, some 900,000 new vehicles are sold in Australia each year. The used car market dwarfs that figure, with some 3.9 million vehicle sales. And, according to Moody's, the price of those second hand cars is soaring, up around 35% in 2020. That was likely driven by the coronovirus pandemic, which saw people turning to personal cars as they shunned public transport.
Eagers Automotive share price snapshot
2021 has seen the Eagers Automotive share price slip 1.3%, slightly more than the 0.8% drop of the ASX 200.
But go back 12 months and the Eagers share price is up an impressive 50.3%. And in case you were wondering, shares are up more than 353% since the 27 March lows last year.
Eagers has paid a dividend to shareholders every year since listing in 1957. It pays an annualised dividend yield of 0.8%, fully franked.
