AutoNation (AN): Bearish Signals Trigger AI Options Alert

AutoNation, through its subsidiaries, operates as one of the largest automotive retailers in the United States, owning and operating 325 new vehicle franchises across 243 stores. They sell 31 different new vehicle brands, with core brands including 'Toyota', 'Honda', 'Ford', and 'General Motors'. AutoNation also operates 'AutoNation'-branded collision centers, used vehicle stores, automotive auction operations, parts distribution centers, a mobile automotive repair business, and an auto finance company. AutoNation serves a broad customer base by offering new and used vehicles, 'parts and service', and 'finance and insurance' products. The company's business strategy focuses on providing a comprehensive suite of transportation solutions, maximizing asset performance, and expanding through strategic partnerships, acquisitions, and new store opportunities. This includes expanding the 'AutoNation Finance' loan portfolio and penetrating the 'After-Sales' service market with 'AutoNation Mobile Service' and 'AutoNationParts.com'.

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AN's technical outlook is bearish, characterized by a pronounced downtrend over the past 90 days. The stock has declined from a high near $228.92 in early September to its current price of $194.31, breaking below its 50-day SMA, which now sits at $216.53, and well below its 200-day SMA. Momentum indicators confirm this bearish sentiment; the MACD is negative and trending further downwards, with the MACD line significantly below its signal line. The RSI is at 36.10, indicating oversold conditions, but also suggesting continued downward pressure. The STOCHk is at 23.43, also confirming the downward momentum. The ADX is at 22.23, suggesting that the downtrend has strength. The recent price action shows a failure to sustain any meaningful rallies, with consistent lower highs and lower lows. Given these signals, AN is likely to continue its bearish trend over the next 1-3 months, with potential for further declines.

AutoNation's MD&A presents a mixed but slightly positive outlook. For the three months ended September 30, 2025, total revenue increased by 6.9% to $7,037.4 million compared to $6,586.1 million in 2024. Gross profit increased by 4.7% to $1,238.4 million. However, new vehicle gross profit decreased by 14.7% to $151.0 million, while finance and insurance gross profit increased by 11.7% to $374.8 million. The company notes that 'new vehicle unit profitability may continue to moderate, in part due to the tariffs announced earlier this year'. For the nine months ended September 30, 2025, net cash used in operating activities was -$38.6 million, a significant shift from the $164.9 million provided in the same period of 2024, primarily 'due to a $384.5 million increase in auto loans receivable' related to the growth of AutoNation Finance. Share repurchases continued, with 2.4 million shares repurchased for $434.8 million during the nine months. The company expects its 'portfolio delinquency rates will continue to normalize and trend upward as our portfolio seasons'. While overall revenue and gross profit are up, margin pressure in new vehicles and the shift to negative operating cash flow warrant monitoring.

AutoNation's Q2 2025 earnings call reflects a moderately bullish sentiment, driven by strong financial performance and strategic advancements. CEO Mike Manley expressed pleasure in reporting an 'outstanding second quarter,' highlighting material improvements compared to the previous year, even after accounting for the CDK outage impact. New vehicle sales increased by 8%, with the Domestic segment leading with a 19% increase year-over-year. Used vehicle gross profit also saw a 13% increase, supported by stronger unit sales and stable profitability. CFO Tom Szlosek noted that total revenue increased by 8% to $7 billion, and gross profit increased by 10% to $1.3 billion. The company's After-Sales business continued to perform strongly, with revenue up 12% and gross profit up 13%. AN Finance also showed significant growth, with originations doubling from the previous year. While the company took a noncash impairment charge of $123 million, this did not detract from the overall positive tone. The company is actively exploring M&A opportunities and remains committed to share repurchases, with $254 million spent year-to-date. Although there is some uncertainty surrounding tariffs, management remains optimistic about maintaining market share and offsetting potential impacts through strategic adjustments.

AN's financial performance presents a mixed picture. Revenue has shown a general upward trend, starting from $6,485.7M in Q1 2024 and reaching $7,037.4M in Q3 2025, suggesting positive sales momentum. However, the gross profit ratio has fluctuated, showing volatility in profitability, ranging from 0.172 to 0.184. The operating cash flow has been inconsistent, with a significant swing from $294.5M in Q1 2024 to -$177.8M in Q2 2025, before rebounding to $191.7M in Q3 2025. The total debt has increased substantially from $4,602.5M in Q1 2024 to $9,304.6M in Q2 2025 before decreasing slightly to $9,032.1M in Q1 2025, indicating increased financial leverage. While revenue growth is a positive sign, the fluctuating profitability, volatile cash flow, and rising debt levels raise concerns about the company's financial stability and its ability to sustain growth in the near term. Further scrutiny of the factors driving these fluctuations is warranted.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting efficient cost management. Return on Equity (ROE) has shown positive movement, signaling enhanced profitability and efficient use of shareholder equity. The Price-to-Earnings (P/E) ratio, while elevated, might be justifiable given the growth trajectory and positive ROE trend. The Debt-to-Equity ratio shows a slight increase, which warrants monitoring, but is counterbalanced by a healthy Current Ratio, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable picture with growth and profitability, though the leverage should be watched closely. The combination of growth and profitability suggests potential for continued positive performance over the next 12 months.