Sonic Automotive Inc. (NYSE: SAH) Will Not Suffer Negative Impacts Of Chip Shortage Because Of Diversified Revenue Mix

Sonic Automotive Inc. (NYSE: SAH) currently trades at consensus forward FY 2021 and 2022 normalized P/E multiple of 9.7X and 8.9X, respectively. 

Chip shortage will not negatively impact Sonic Automotive’s revenue and earnings. 

Despite the current semiconductor chip shortage that is likely to run until 2022, Sonic Automotive is unlikely to be impacted that much. Already major automobile OEMs have guided for lower production and revenue for 2021. Still, Sonic’s diversified earnings and revenue mix will help it offset any negative impact that the current chip shortage might have. This is the reason Wall Street is expecting the company to show strong growth this year.

Since the chip shortage won’t affect Sonic Automotive, it is befitting to give it’s a Neutral rating considering its unattractive valuations and in line with peers. In addition, during the Q1 2021 results release, the company indicated that it had luxury segment inventory which was helped by delivering products from other regions. As a result, it expects new luxury car volumes in Q2 2021. 

Sonic Automotive opens EchoPark location in Alabama 

Recently the company announced the opening of its latest EchoPark store in Birmingham, Alabama, offering 1-4-year-old pre-p0wned cars. EchoPark Birmingham will be the company’s 22nd store and the first in Alabama following recent openings in Arizona, New York, and Maryland. 

David Smith, the company’s CEO, said, “We are very excited to bring the EchoPark brand to Birmingham, which has been a great market for Sonic’s new vehicle business for many years. More and more people are getting back out on the roads as we head further into 2021, and we expect to see continued strong demand for pre-owned vehicles and rapid growth for the EchoPark brand as a result of its inventory selection, unbeatable pricing and unique guest experience.”