What Happened?
A number of stocks jumped in the afternoon session after the latest Consumer Price Index (CPI) report showed inflation at 3.0%, fueling investor optimism for potential interest rate cuts. The CPI, a key measure of inflation, came in slightly lower than consensus forecasts on a month-over-month basis. While the 3.0% annual rate remains above the Federal Reserve's 2.0% target, the market-friendly data prompted a rally, with the S&P 500 and Nasdaq hitting record highs. For consumer-facing industries, moderating inflation and the prospect of lower interest rates are significant tailwinds. These conditions can translate into greater disposable income and improved consumer confidence, encouraging spending on non-essential goods and services. As a result, sectors like retail, travel, and automotive are seeing renewed investor interest, as they are well-positioned to benefit from this potential increase in consumer appetite.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Vehicle Retailer company Lithia (NYSE:LAD) jumped 4%. Is now the time to buy Lithia? Access our full analysis report here, it’s free for active Edge members.
- Vehicle Retailer company Camping World (NYSE:CWH) jumped 3%. Is now the time to buy Camping World? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Lithia (LAD)
Lithia’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 5.1% on the news that the company reported record third-quarter revenue and a significant increase in earnings per share. The automotive retailer announced record third-quarter revenue of $9.7 billion. Its adjusted diluted earnings per share came in at $9.50, a 17% increase from the same period in the previous year. The company saw strong growth across its business, with same-store total revenue up 7.7%, used vehicle revenue up 11.8%, and aftersales gross profit rising 9.1%. Adding to the positive results, Lithia also repurchased 5.1% of its outstanding shares during the quarter, signaling confidence in its own stock.
Lithia is down 4.9% since the beginning of the year, and at $331.60 per share, it is trading 15.9% below its 52-week high of $394.27 from November 2024. Investors who bought $1,000 worth of Lithia’s shares 5 years ago would now be looking at an investment worth $1,374.
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