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    Lithia Motors (LAD): Reassessing Valuation as Weak Store Traffic and High Leverage Weigh on the Long-Term Story

    Simply Wall St·12/21/2025 02:27:27
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    Fresh commentary on Lithia Motors (LAD) is putting a spotlight on its weaker same store sales and high leverage, and the stock is reacting as investors reassess how durable its growth story really is.

    See our latest analysis for Lithia Motors.

    The stock has enjoyed a solid 30 day share price return of 13.69 percent to about $343.89. However, that sits against a slightly negative year to date share price return and a modestly negative 1 year total shareholder return. This suggests momentum is improving but still fragile as investors balance growth ambitions with execution and balance sheet risks.

    If Lithia’s mixed momentum has you reassessing your car retail exposure, this could be a good moment to explore other auto manufacturers that might offer a different blend of growth and resilience.

    With the shares still trading below analyst targets and some models pointing to a sizeable intrinsic discount, is the market overlooking Lithia’s long term cash generation potential, or already baking in all the growth and balance sheet risk?

    Most Popular Narrative: 12.7% Undervalued

    With Lithia Motors' fair value estimate sitting modestly above the last close, the narrative implies the market is still underpricing its long term earnings power.

    The analysts have a consensus price target of $389.6 for Lithia Motors based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $500.0, and the most bearish reporting a price target of just $310.0.

    Read the complete narrative.

    Curious how steady mid single digit growth, slightly rising margins and a lower than industry earnings multiple can still support a higher valuation? The full narrative unpacks the specific revenue, earnings and discount rate assumptions that bridge today’s price to that higher fair value.

    Result: Fair Value of $394.13 (UNDERVALUED)

    Have a read of the narrative in full and understand what's behind the forecasts.

    However, stubbornly weak same store sales and persistently high SG&A could derail margin expansion and force the market to reassess growth and valuation assumptions.

    Find out about the key risks to this Lithia Motors narrative.

    Build Your Own Lithia Motors Narrative

    If you would rather stress test the assumptions yourself instead of leaning on this view, you can quickly build a personalised thesis in minutes, Do it your way.

    A great starting point for your Lithia Motors research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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    This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.