Analyst Note| David Whiston, CFA, CPA, CFE |
On Dec. 2, Asbury’s stock rose 4.3% after it unveiled its new omnichannel shopping platform for new and used vehicles called Clicklane, which will replace its current tool called Push Start. Management also announced a 2025 revenue goal of $20 billion, with $12 billion of incremental revenue above adjusted 2020 revenue of $8 billion split as $5 billion from Clicklane, $2 billion from same-store growth, and $5 billion from acquisitions. After incorporating this target into our model and giving the firm some assumed overhead cost benefits from less brick-and-mortar stores needed over time, we are raising our fair value estimate by 65% to $168. The change is from a compound annual growth rate for 2020-24 revenue of 18.6%, up from nearly 8% in our prior model, and due to modeling more scale to allow our midcycle operating margin including floorplan interest to be 4.5% instead of about 4%.