Continuous weakness in auto sales is likely to limit OEM ad spending across all channels, which adversely impacts Autohome Inc’s ATHM growth outlook, according to Benchmark.
The Analyst
Benchmark’s Fawne Jiang downgraded Autohome from Buy to Hold.
The Thesis
Auto dealers in China witnessed substantial pressure in 2Q 2019 and have continued to suffer deteriorating profitability due to macro environment challenges, Jiang said in the note. He added that the uncertainties around dealer growth could increase in the near to intermediate term.
Autohome’s margins could come under pressure as the company may be compelled to absorb more costs in an effort to help its OEM and dealer partners, Jiang mentioned. He explained that while this strengthens Autohome’s long-term relationships, it casts clouds over the company’s earnings outlook.
The analyst reduced the EPS estimates for FY2019 and FY2020 to $4.20 and $4.57, respectively.
Price Action
Shares of Autohome traded around $82.04 on Friday.
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