Why AutoCanada Inc. (TSE:ACQ) Is Trading Down Over 6%?

Why AutoCanada Inc. (TSE:ACQ) Is Trading Down Over 6%?


AutoCanada Inc. (TSE:ACQ) shares are trading down sharply as the company continued to face some issues that impacted its fourth quarter results. CIBC termed the company’s performance as Underperformer and trimmed its target price on the stock by C$2 to C$20. This suggests that there are downside risks from the current levels.

The brokerage thinks that AutoCanada delivered weak results for the fourth quarter with EBITDA recording 27 percent drop, which is below its expectations and consensus. The company sees a difficult first half of the current year though there is some optimism for improvement in the second half of the current year.

Analysts, Matt Bank, Mark Petrie, and John Zamparo cited that same-store sales continued to lag Alberta light vehicles sales due to issues discussed earlier. That included under-performing OEM mix, tight consumer financing, general economic weakness and product shortages.

The brokerage sees that AutoCanada continued to face these issues and further aggravated by a weak CAD besides the wider auto cycle turning. In a research note to clients, the lead analyst viewed, “The company’s outlook suggests negative SSS continue through at least H1/17 and likely a few quarters longer. This is in line with our previous forecast and we have not materially changed numbers. However, the actual outcome is highly uncertain and based on a number of volatile exogenous factors such as oil price and currencies, as well as regional employment trends and consumer sentiment.”

Looking ahead, the brokerage pointed out that the recently appointed CEO, Steven Landry, enjoys a clear mandate to steer the future of AutoCanada. CIBC thinks that his selectiveness on M&A and focus on process besides OEM relationships should bode well for the company. However, the lead expects believes that progress would be slow.

At time of writing this, the stock dropped 6.33 percent.