Bucking the trend of Wall Street, the stock prices of public car dealerships have skyrocketed as much as 80 percent since Sept. 11, boosted by strong earnings, according to a USA Today article by Earle Eldridge.
"The conventional wisdom going into the beginning of the year was that automotive
retail was going to take a hit," said Mike Jackson, CEO of AutoNation. But now, Wall Street sees dealer groups meeting and exceeding earnings estimates, even during economic hardships, according to Jackson.
Auto dealers are also benefiting from automakers' huge incentives, which help sell a lot of cars but don't cost dealers a dime. In addition, in tough times, people shop for used cars, which are more profitable than new ones; and they hang onto their vehicles longer, thus needing more repairs and service.
Additionally, Wall Street analysts assume that if weak dealerships fold during rough times,
cash-strong public dealerships should be able to gain market share and expand at bargain prices.