The country's foremost auto dealership advisory firm

Prices for Public Auto Retailers Bounce Back

By: Bel Air Partners
Published: May 28, 2020

After overreacting in late March, Wall Street may now again believe in traditional automotive retailing. This is an interesting contrast to Wall Street’s opinion in late March when public Blue-Sky values plummeted. As noted in our March 23, 2020 article, Blue-Sky values for the publicly held automobile dealership groups fell an average of 66% in just one month. Since that time, Blue-Sky values have snapped back to within 20% of their February 20, 2020 values.

The public market has typically been more volatile in valuing dealership assets than the private market. Now, many dealers, including the public companies, continue to focus on maintaining liquidity and ramping up operations rather than completing acquisitions. They have been increasingly conservative in their valuation ideas, falling by about 30%. In contrast, the Blue-Sky valuations of the public companies now stand an average of 20% below their February 20th pre-COVID valuations, and slightly more than 30% below their 52-week high valuations. The Blue-Sky multiples for Lithia and Sonic are beginning to approach their pre-crash values. Overall, the share prices are recovering along with expectations that the nation’s governors will continue to loosen restrictions.

The Bel Air Public Company Blue Sky Index is calculated using Wall Street earnings estimates, public company filings and presentations, and public company stock prices.

While it may be too soon to tell when dealership acquisitions will meaningfully rebound, we believe the charts above are reasons for optimism. The average public company Blue-Sky Multiple now stands at 6.0x, compared to an average pre-Covid value of 7.5x and a 52-week high of 8.8x.

If you have questions regarding this information or would like to know what your Blue Sky value is, contact us.

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