Eagers's Canada Business 'Valuable Hedge' Against Current Australia Cycle

Dow Jones11-06

2319 GMT - Eagers Automotive's foray into Canada looks increasingly well-timed after the car dealer's update highlighted intensifying pressure in Australia. Morgans sees Eagers's CanadaOne business as a valuable hedge against tough conditions in Australia where an elevated supply of new vehicles has coincided with consumers dealing with cost-of-living pressures and higher interest rates. "Strategically, Eagers's scale provides opportunities from an evolving industry structure, which we expect current industry pressures to accelerate," analyst Jared Gelsomino says. "While near-term earnings have reset lower, we look through the cycle and see recent weakness as a buying opportunity." Morgans keeps a "buy" call on Eagers, but lowers its price target by 26%, to A$19.50/share. Eagers is down 2.9%, at A$16.13, today, extending yesterday's 13% fall.

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