On Wednesday, Morgan Stanley analysts upgraded shares of Lithia Motors Inc LAD to Overweight from Underweight and lowered the price target from $80 to $75.
Ravi Shanker outlined four reasons for the upgrade:
- Consensus numbers have been reset lower
- Multiple now back down to normal
- Execution risk on DCH acquisition remains but looks priced in
- Third quarter used issues probably not structural
Shanker feels the risk-reward is now good enough to own shares of Lithia Motors: “Our fiscal year 2015 EPS now goes to $5.95 from $6.22 and our price target goes to $75 from $80 or 12.5x PE. This is nearly 15% upside to the current price which now makes us Overweight.
Shares of Lithia Motors recently traded at $68.61, up 3.9 percent.
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