Morgan Stanley less bearish on auto dealers, upgrades Asbury Automotive

As previously reported, Morgan Stanley upgraded Asbury Automotive to Equal Weight from Underweight with a price target of $240, up from $190. The firm believes its previous latent concerns about the franchise dealer business model have “proven largely mitigated” and it now sees greater risk in other pockets of its U.S. autos coverage. In that context, the firm upgrades the franchise dealer complex with a positive multiple re-rating given that it sees greater risk in auto companies with entanglements to China, regulatory risk, EV investments, and calls on cash for compute and AI infrastructure.