AutoNation Buyers Get Carried Away

The good news for shareholders of AutoNation, Inc. AN is that it is trading higher by $3.24 (5.4 percent) at $62.58 in Tuesday's session. The bad news is that the issue is nearly $3.00 off its high for the day and all-time high of $64.97. The former all-time high for the issue was $61.29.

The catalyst for the rally is stronger-than-expected Q4 results. Earlier Tuesday, it reported EPS of $1.02 vs. estimates of $0.91, on revenue of $5.05 billion vs. estimates of $4.90 billion. This is the second quarter in a row it has topped Street estimates and has meet or beat in four of the last five quarters, while matching that feat on the revenue front.

One Wall Street firm that may have been surprised by the solid beat is Goldman Sachs. The firm downgraded the issue from Buy to Neutral on January 21, but maintained its $64.00 price target.

It should be noted that the pre-market rally that led to a sharply higher opening was on very light volume, as current longs put the squeeze on outstanding short sellers. Once the true liquidity came in at 9:30 a.m., profit-takers quickly took advantage of the price discrepancy and the sent the issue lower.