Wednesday, Goldman Sachs (NYSE:GS) analysts revised their stance on shares of AUTO1 Group SE (AG1:GR) (OTC: ATOGF), elevating the stock rating from Neutral to Buy and increasing the price target to €20.50, up from the previous €10.70. This new target suggests a potential upside of approximately 27%.
The upgrade comes despite the stock's significant rally over the last six months, which saw a 137% increase, although it still trades 68% below its March 2021 Initial Public Offering (IPO) price.
Analyst highlighted three main factors that are believed to be undervalued by the market and could drive the stock's further growth. Firstly, there are several opportunities for increased gross profit per unit (GPU) with Autohero, where Goldman Sachs estimates are roughly 2% above the consensus for the years 2024-2029.
Secondly, the potential for AUTO1 to accelerate market share gains in its Merchant division through strategies such as densifying its branch network and boosting online penetration. Lastly, Tate anticipates that adjustments to the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2025 and 2026 could be higher than current consensus estimates, based on a detailed analysis of personnel costs.
The analyst presents a "blue-sky scenario" where AUTO1 Group could achieve a significant increase in gross profit and adjusted EBITDA by 2026. The projections indicate a potential for the group's gross profit to reach €995 million and adjusted EBITDA to hit €230 million, representing increases of 16% and 40%, respectively, compared to consensus estimates.
The upgrade and new price target set by Goldman Sachs reflect a positive outlook on AUTO1 Group's future financial performance and market position. The analysis by Goldman Sachs suggests that the company has multiple avenues for growth that have not yet been fully recognized by the market.
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