Barclays: Investment opportunities exist for US auto dealers as valuations fall.

Barclays analyst John Babcock stated that, considering the potential increase in profits for the fiscal year 2026 and the fact that current valuations have fallen from recent highs, there are investment opportunities in the automotive dealership sector, especially for dealerships that have digital auction platforms, such as ACV Auctions (ACVA.US) which has a "hold" rating and OPENLANE (KAR.US) which has a "buy" rating. In a research report on the automotive retail industry, Babcock rated the entire industry as "neutral," but pointed out that there are several companies with potential to outperform the average due to their strong growth trends and ability to resist risk in adverse economic cycles. Babcock mentioned that demand for used cars in the United States is not strong, and automotive credit data also shows weakening demand in the subprime market. However, Carvana (CVNA.US) was given a "buy" rating due to its investment in optimizing the online purchasing experience, showing strength beyond the market average. On the other hand, CarMax (KMX.US) was given a "sell" rating due to inconsistent operational performance, potential higher-than-expected loan loss reserves, and slowing growth. Babcock gave a "buy" rating to the following companies in both new and used car dealerships: AutoNation (AN.US), Group 1 Automotive (GPI.US), Lithia Motors, Inc. (LAD.US), and Penske Automotive Group, Inc. (PAG.US). These ratings are based on strong same-store sales growth, stable operational performance, a good product mix, and above-average growth. As for Asbury Automotive Group, Inc. (ABG.US) and Sonic Automotive, Inc. Class A (SAH.US), they were given a "hold" rating.