Performances of Motorpoint and Lookers show how the pandemic has transformed the car-buying industry.
It was full speed ahead for shares in Lookers (LSE:LOOK) and Pendragon (LSE:PDG) today as the dealerships gear up for pent-up demand from drivers desperate to get behind the wheel of “something newer”.
Monday's re-opening of car showrooms in England and Wales is set to give the industry a major boost, although for Lookers its performance in the third national lockdown gives it added reason for optimism after orders were met by dealership teams, call centres and its website.
Lookers sold over 44,000 new and used vehicles in the first quarter, representing a drop of only 10% on a year earlier despite the limitations of Covid-19. It also believes it “significantly outperformed” the new vehicle market in the quarter, with an estimated 7% share.
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Recent trading and the prospect of busy forecourts over the summer mean Lookers thinks that profits for the year will be much higher than the £22.6 million forecast in the City.
Its second upgrade in as many months sent shares racing ahead 15% to 71.7p, with Pendragon in its slipstream as the read-across helped the small-cap's shares 12% higher or 2.1p to 19.7p. Vertu Motors (LSE:VTU), which is already trading at its highest level since December 2019, was little changed at 41.7p, but Marshall Motor Holdings (LSE:MMH) improved 3% or 5p to 178p.
Motorpoint Group (LSE:MOTR), which has 14 outlets as well as Auction4Cars.com, was up 2p at 261p after its own update revealed a “robust” volume performance in the year to 31 March, with the sale of 68,000 vehicles.
It said it retained its position as the number one retailer of nearly new cars in the UK, adding that online-based sales were up 89% the final quarter of the year.
The performances of Motorpoint and Lookers show how the pandemic has transformed the industry by accelerating customer adoption of digital channels for car buying.
For Lookers, today's update is another sign the company has turned the corner after last year's investigation into the overstatement of profits caused the publication of accounts to be delayed and shares to be suspended. They resumed trading in January at 22p.
The better-than-expected update prompted analysts at Peel Hunt to upgrade their 2021 profits guidance by £11 million or 47% to £34.8 million.
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They added: “Lookers is coming out of lockdown as a much leaner, more efficient and digitally-focused business. Any pent-up consumer demand is likely to drive further upgrades as earnings recover.”
With shares trading on 6.9 times forecast 2022 earnings, the City firm reiterated its 'buy' recommendation and raised its price target to 100p. Counterparts at Numis are at 80p, having raised their guidance from 55p on the back of forecast upgrades and a wider re-rating of the sector as visibility improves.
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