AutoNation (AN) has increased vehicle orders in the fourth quarter of the year in an effort to restock showrooms that had been emptied out during the “Cash for Clunkers” program. The Florida-based largest automotive retailer in the U.S. has revealed that it has hiked orders by 50% in the fourth quarter compared to the previous quarter. The company has already ordered more cars than expected in the third quarter.

AutoNation greatly benefited from the “Cash for Clunkers” program, a.k.a. Car Allowance Rebate System (CARS) – introduced by the U.S. Government in late July. The $3 billion cash incentive program, ended August 24, allowed consumers to trade in their old gas-guzzling cars and trucks with a mileage of 18 miles per gallon or less for a value of up to $3,500–$4,500.

A few days before the program ended, AutoNation withdrew to make sure it could submit the paperwork on the thousands of sales to the Government before the deadline. The dealer has alone sold 13,000 vehicles under the program and has estimated that the Government owes it more than $54 million from Clunker sales. The Government has vouched for payment within 30–60 days.

The retailer now waits for the payment to support the appraisal of its orders. As such, we have upgraded the stock to an Outperform recommendation with a target price of $22.00.
Read the full analyst report on “AN”
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