Why the Autosports (ASX:ASG) share price tumbled 7% today

The Autosports Group Ltd (ASX: ASG) share price closed 7% down today after the car retailer announced its half-year results.

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The Autosports Group Ltd (ASX: ASG) share price finished 7.3% down for the day at the closing bell. Early in trade, the automotive dealership owner provided its half-year results to the market.

It appears expectations were higher than what was delivered. The Autosports share price declined throughout the day, closing at $1.90.

What was moving the Autosports share price today?

It’s good, but concerns linger

Following a crippling crunch during the peak of COVID-19 shutdowns, Autosports had regathered itself with new-found demand. Due to the implications of the pandemic, people were concerned about public transparent, and others developed a desire to travel locally. These catalysts help lift the car market overall.

According to Vfacts data, December 2020 witnessed a growth of 13.5% in new car sales compared to December 2019.

All of these indicators point towards a great tailwind for Autosports, and so the share price ran to multi-year highs. Yesterday marked a new 52-week high for the share price, at $2.05. Hence, all this exuberance came with high expectations.

So, the results are in – total revenue grew by 7.8% to $903.7 million. This is despite a $48 million impact due to lockdowns in Victoria. Earnings before interest, tax, depreciation, and amortisation (EBITDA) pleasantly increased by 50.4% to $56.2 million. New vehicle sales outperformed used vehicle sales, with an increase of 22.3% compared to a decrease of 7%.

Flowing through to a bottom-line net profit after tax (NPAT) of $16 million. Autosports NPAT was a significant improvement on the $49.9 million loss in the prior period.

As a result of the profit, Autosports declared a dividend of 2 cents per share payable to shareholders.

Shareholders might remain concerned about the 4 dealerships and 2 collision repair sites generating 14% of ASG’s revenues being impacted. Lockdowns have resulted in a 30% reduction in revenues in Victoria compared to the prior period.

Supply and demand rebalancing?

The growth in revenue has largely been a story of supply and demand for many car dealerships. Demand had lifted due to the circumstances, and supply had been capped due to logistics being impacted.

Shareholders may be asking the question then, what happens when the demand returns to historical averages and supply chains get back on track. It’s a warranted question considering the vaccine rollouts and the promise of a ‘normal’ to return once more.

For now, Autosports has advised that January trading has been above expectations. However, revenue growth will be constrained by new vehicle supply.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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