The stock of Penske Automotive Group, which two days ago canceled its bid for GM's Saturn brand, is now a good buy, a Standard & Poor's equity analyst said today.
Analyst Efraim Levy upgraded the dealership group from "hold" to "buy" because of the hit its stock took after announcing, after the market closed Wednesday, that it had backed out of its proposed deal for the General Motors Co. brand.
After closing at $19.18 Wednesday, Penske's stock fell to $16.12 by closing time yesterday. It closed at $15.15 today.
"The stock took a bigger hit than I thought it deserved -- if it deserved anything," Levy said today in an interview. As a result, he advocated buying the stock while it was trading below his target price of $19.
Levy said he hadn't viewed the pending Saturn transaction as either a positive or negative for Penske Automotive because of the lack of information about the deal. Penske abandoned its plans to buy Saturn after arrangements to provide future products for the brand fell through.
"It kind of confirms my view of Penske's business acumen in that it's good not to do a deal that you can't create value from," Levy said.
He said he expected traffic to improve this quarter and next year at dealerships nationwide, including Penske's. Levy said he thinks that pulled-ahead cash-for-clunkers purchases will have a minimal impact starting this month and that dealership traffic will improve as the economy improves.
In December GM said it planned either to sell or wind down Saturn as part of its restructuring, which eventually landed the automaker in a 39-day Chapter 11 bankruptcy. Now that Penske has pulled out, GM says it will wind down Saturn and its dealer network.