Morgan Stanley Cuts Lithia Motors To Sell With Shares Near Bull Case

Morgan Stanley analyst Adam Jonas downgraded Lithia Motors (LAD) to Underweight from Equal Weight with a price target of $310, up from $294. The stock closed Tuesday up $12.80 to $390.85.

A "strong" Q4 report and excitement around the growth strategy has taken Lithia to just under the $400 per share bull case, Jonas tells investors in a research note. While the company's $50 earnings per share goal is realistic, it relies heavily on the acquisition of brick and mortar franchise dealers "at a risky time for the industry," says the analyst.

Following the stock's re-rating, Jonas feels investors can gain access to similar themes at more attractive valuations from Asbury Automotive (ABG), Group 1 Automotive (GPI), Penske Automotive (PAG), and CarMax (KMX), all of which are Overweight rated.

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