AutoNation (AN) – Bullish
|AutoNation, Inc. (NYSE: AN), the largest U.S. auto retailer, is scheduled to report earnings on Thursday before the open. AN’s new vehicle sales soared in September, logging a 35% gain from a year earlier compared to 29% growth in the overall industry. That bodes well for quarterly earnings, which analysts expect will increase just 17% over last year. Given that AN has produced earnings increases of 66% on average for the past four quarters, it’s a pretty safe bet that the company will log its eighth straight earnings beat on Thursday.On the sentiment front, two things stand out. First, just two of nine covering analysts rate the stock a “buy.” Given the company’s recent sales numbers, there’s a better than good chance that AN will receive an upgrade or two after earnings. Second, short interest is monstrous. Even after the biggest decrease in short interest/float ratio among all S&P 500 companies in the latter half of September, the stock still has the highest ratio. That tells us two things: 1) Pessimism among these shorts is beginning to unwind and could be the sign of a massive short squeeze; and 2) There’s plenty of short interest left to provide added buying pressure.
Another earnings beat could unleash a huge short squeeze that sends the stock and its call options soaring.
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