Because the resurgence of COVID-19 cases is again benefitting automobile sales as people purchase cars to avoid public transport, the car dealership industry is well-positioned to witness sales growth. And we think AutoNation (NYSE:AN) and Vroom (VRM) should benefit from this. But which of these two stocks is a better buy now? Read more to find out.AutoNation, Inc. (AN) in Fort Lauderdale, Fla., operates as an automotive retailer in the United States through its subsidiaries. The company operates through three segments: Domestic, Import, and Premium Luxury. In comparison, Vroom, Inc. (VRM) in New York City operates an e-commerce platform to buy and sell new and used cars. It also offers financing solutions.
As governments worldwide reinstate lockdown and social distancing measures to limit the spread of the highly transmissible COVID-19 omicron variant, people are again starting to shy away from public transportation. Therefore, the demand for new and used cars is expected to increase despite high prices due to the impact of the global semiconductor shortage on production. This should drive sales by car dealership companies. Furthermore, as semiconductor chip shipments improve and plants return to full working capacity, the high demand for electric cars due to rising oil prices and climate change concerns should drive the industry’s growth. Therefore, we think both AN and VRM should benefit.
Over the past three months, AN has gained 15.4% in price versus VRM’s negative returns. Also, AN’s 72.9% gains year-to-date compare with VRM’s negative returns. AN is also the clear winner with 81.4% gains versus VRM’s negative returns in terms of the past year’s performance.