Shortages in parts, especially semiconductors, this year, has been a boon to auto dealerships. Consumers resorted to buying used cars and parts, which benefits a company such as AutoNation, Inc. (NYSE:AN). The stock has seen strong revenue growth and share gains this year. Since AN is still very much undervalued, there is a lot more upside left for investors.AutoNation, Inc. (AN) is the largest automotive dealer in the United States, with over 230 dealerships and over 300 locations, including collision centers. AN has eight AutoNation USA used-vehicle stores, four auction sites, and over 50 collision centers across 16 states, but primarily in the Sunbelt metropolitan areas.
The company just posted its sixth consecutive record numbers for the third quarter. Earnings surged 115% year over year due to higher-than-expected profits from the new and used vehicle units. Low inventory due to the chip shortage is yielding strong pricing power for dealers.
Management believes demand will continue to exceed supply well into next year. An upside to recent inflation is that customers with trade-in vehicles are pretty happy as they are worth more than expected. This means inflation isn't likely to slow consumers' automotive purchasing power in 2022.