Sonic Automotive (SAH) Stock Forecast & Price Target

Sonic Automotive's franchise business serves as a robust foundation, generating stability and consistent revenue, particularly through its emphasis on luxury and import vehicles, which constitute 86% of its new-vehicle revenue. The company reported $14.2 billion in revenue for 2024, with significant contributions from Texas and California, totaling 51% of the overall revenue, while EchoPark stores added $2.1 billion. Furthermore, the positive outlook on EchoPark is supported by a recovery in used auto demand, positioning it as an industry price leader due to its unique business model focused on financing and warranty attach rates.

Sonic Automotive's stock faces a negative outlook primarily due to its uneven performance within the EchoPark division, which has recently experienced two significant negative surprises in the past four quarters, highlighting month-to-month volatility in used auto supply and demand. The company's revenue projections have been downgraded, with EchoPark's unit estimates now reflecting only 1% year-over-year growth, contrasting sharply with the previous management's high-end growth guidance. Additionally, a reduced valuation of EchoPark—reflecting a decline in the multiple applied to its projected EBITDA—and an overall elevated enterprise value discount signal growing concerns over near-term execution and profitability challenges in the fluctuating used car market.