Analyst action and valuation
Stephens lowered its target price for Sonic Automotive Inc. to $67 from $68 and maintained an Equal Weight recommendation on the shares. The new target is in line with consensus analyst targets, and the shares currently trade at around a 17.04 times price-to-earnings multiple, with analyst targets spanning a $67 to $92 range.
Quarterly results that prompted the move
The firm’s revision came after Sonic Automotive released its fourth-quarter fiscal 2025 results on February 18. Adjusted EBITDA for the period was $142.6 million, a 1.0% decline compared with the year-earlier quarter, and that figure came in about 4.8% below consensus estimates. Reported adjusted earnings per share were $1.52, a 0.6% year-over-year increase, noted as exceeding expectations by roughly 1.0% in one set of analyses.
Separately, the company’s reported fourth-quarter figures were characterized as slightly missing consensus on other measures: adjusted earnings per share of $1.52 were described as short of estimates by $0.01 in another report, and revenue came in at $3.9 billion versus a consensus forecast of $3.95 billion. Those results reflected a 1% decline in total revenues year-over-year.
Profitability and cash flow
Despite the top-line and certain earnings misses, Sonic posted a record quarterly gross profit of $598.7 million, up 4% from the prior year. The company reported net income of $46.9 million for the quarter, a 20% decrease year-over-year, while adjusted net income was $52.2 million, down 2% from a year earlier. Margin metrics remain a concern with gross profit margins reported at about 15.54%, even as the company displays a relatively strong free cash flow yield near 20%.
EchoPark expansion plans and timing
Company management said it intends to resume EchoPark expansion in 2026, targeting one to two store openings in the fourth quarter of that year. The relaunch strategy includes a planned brand marketing investment in the range of $10 million to $20 million. Management reiterated a long-term objective for EchoPark of reaching 90% U.S. coverage and selling more than 1 million units annually.
Operational concerns for 2026
Looking ahead, management highlighted risks related to potential tariff-driven price increases and consumer price elasticity in the second half of 2026. The company also indicated that 2026 service and parts gross profit will be supported by customer-pay work as warranty growth returns to more normal levels.
How the target reflects earnings expectations
Stephens’ revised $67 price objective corresponds to approximately 10 times the firm’s estimate of Sonic Automotive’s next-twelve-months earnings per share. The combination of record gross profit alongside pressures on revenue and net income helped shape the analyst view that justified the modest reduction in the price target.
Summary assessment
The quarter reveals a mixed operational picture for Sonic Automotive: strong gross profit performance and cash generation juxtaposed with softer revenues and lower net income. Management’s deliberate EchoPark reopening plan and the noted external risks frame expectations for 2026 performance and underpin the analyst recalibration.