Sonic Automotive (SAH) Stock Forecast & Price Target

Sonic Automotive demonstrated strong financial performance in 4Q24 with a gross margin increase of 0.8% year-over-year, reaching 50.8%. Notably, finance and insurance (F&I) gross profit per unit increased by $564 year-over-year to $2,927, while service and parts gross profit grew by 12.2% year-over-year, indicating healthy revenue streams in both areas. The improvement in SG&A as a percentage of gross profit further reflects operational efficiency and effective cost management, contributing to a positive outlook on the company’s overall financial health.

Sonic Automotive reported a decline in used vehicle gross profit per unit (GPU) in 4Q24, with a decrease of $200 sequentially and $49 year-over-year to $48, indicating a challenging pricing environment and increased wholesale dispositions impacting profitability. The average store count for EchoPark dropped significantly from 25 in 4Q23 to 18 in 4Q24, reflecting management’s conservative approach due to inventory management issues and lower gross profits, ultimately leading to a cautious revenue growth outlook of only 2% alongside flat gross profits year-over-year. Additionally, the expectation of negative EBITDA for 1Q25 and 4Q25, coupled with anticipated declines in finance and insurance GPU, underlines the ongoing difficulties within the company's operations, particularly in the used vehicle segment.