Investors are punishing AutoCanada Inc. due to its connection with Alberta, nevertheless the stock price decline is overdone also it might be time and energy to buy shares within the dealership group, according to AltaCorp Capital.
Analyst Chris Murray cut his price target on AutoCanada to $26 from $33 but upgraded the stock to outperform, citing an approaching inflection point.
“The market continues to be extremely punitive toward the storyplot, essentially treating it as a crude oil derivative and refusing to attribute any value for the company’s growth prospects and diversification from Alberta,” Murray wrote inside the note to clients.
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As an effect, Murray believes there’s up to Fifty percent upside towards the stock, despite cutting his estimates for sales, margins and acquisition growth.
AutoCanada gets up to 50 percent from the revenue in the dealerships in Alberta, where the economy remains battered by falling oil prices, but it is expanding in Eastern Canada, where auto sales need to hit another record high this season.
“We believe we might be approaching the juncture where we’ve reasonable visibility for your downside, which frames the larger bullish upside case,” Murray wrote.
Murray expects AutoCanada to accomplish one acquisition per quarter this season, with none in 2017 – a remarkable slowdown within the multi-year acquisition spree the organization continues to be on.
