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Huge Gains Expected for Automotive Sector Stocks (GM, F, HTZ, CAR, ZIP, AN, KMX, CRMT, ORLY, AZO, PBY)

New car sales in September are estimated to have risen 19% year-over-year, though down -5.5% sequentially. The seasonally adjusted annual rate of new car sales is now set at about 12.9 million new cars. That’s better than original projections, but still well below 2007 annual sales of 16.1 million new cars. We’ll look today at target price estimates for General Motors Co. (NYSE: GM) and Ford Motor Co. (NYSE: F) to see how analysts are looking at the new car market going forward. Recent union settlements have also improved the outlook for these two firms, now that the threat of a strike is gone.Used car sales are estimated to have topped 36 million vehicles in 2010, and new car makers are competing with those sales by increasing incentives. There is also intense competition in the used car market from literally thousands of small dealers. We’ve got some insight today on new car dealer AutoNation, Inc. (NYSE: AN), and used car dealers CarMax Inc. (NYSE: KMX) and America’s Car-Mart, Inc. (NASDAQ: CRMT).

Competition plays a critical role in car rental agencies as well. We’ve gathered some data on Hertz Global Holdings Inc. (NYSE: HTZ) and Budget Group Inc. (NYSE: CAR), who were battling over Dollar Thrifty until earlier this month. We’ve also included Zipcar Inc. (NASDAQ: ZIP) in our review because there is evidence that its short-term rental model is about to get competition from both the big rental companies and the new car makers themselves.

Finally, we’ve looked at parts suppliers O’Reilly Automotive, Inc. (NASDAQ: ORLY), AutoZone, Inc. (NYSE: AZO), and Pep Boys – Manny, Joe, and Jack (NYSE: PBY). As car owners hold onto their cars longer, parts suppliers stand to profit.

All data from Yahoo! Finance and current stock prices were gather just before noon today.

General Motors Co. (NYSE: GM) has a median target price of $42.00 from 17 brokers. Shortly before noon today, shares are trading today at $22.78, for an implied gain of $19.22, or 84%. GM’s forward P/E is 5.24 and the company does not pay a dividend. The stock’s 52-week trading range is $19.05-$39.48, and at today’s price that’s about 20% above its 52-week low and 42% below the 52-week high.

Ford Motor Co. (NYSE: F) has a median target price of $16.00 from 15 brokers. Shares are trading today at $11.61, for an implied gain of $4.39, or 38%. Ford’s forward P/E is 6.59 and the company does not pay a dividend. The stock’s 52-week trading range is $9.05-$18.97, and at today’s price that’s about 28% above its 52-week low and 39% below the 52-week high.

Hertz Global Holdings Inc. (NYSE: HTZ) has a median target price of $21.00 from 5 brokers. Shares are trading today at $10.37, for an implied gain of $10.63 or 133%. Hertz’s forward P/E is 6.43 and the company does not pay a dividend. The stock’s 52-week trading range is $7.80-$17.64, and at today’s price that’s about 33% above its 52-week low and 41% below the 52-week high.

Avis Budget Group Inc. (NYSE: CAR) has a median target price of $27 from 5 brokers. Shares are trading today at $11.61, for an implied gain of $15.39, or 133%. Avis’s forward P/E is 8.95 and the company does not pay a dividend. The stock’s 52-week trading range is $8.45-$19.49, and at today’s price that’s about 37% above its 52-week low and 40% below the 52-week high.

Zipcar, Inc. (NASDAQ: ZIP) has a median target price of $31.25 from 4 brokers. Shares are trading today at $17.38, for an implied gain of $13.87, or 80%. Hertz’s forward P/E is an astronomical 273 as the company has yet to show a profit since its IPO in April. The company does not pay a dividend. The stock’s 52-week trading range is $16.50-$31.50, and at today’s price that’s about 5% above its 52-week low and 45% below the 52-week high.

AutoNation, Inc. (NYSE: AN) has a median target price of $32 from 8 brokers. Shares are trading today at $37.06, about 5% above its consensus target price. AutoNation’s forward P/E is 17.55 and the company does not pay a dividend. The stock’s 52-week trading range is $22.28-$41.55, and at today’s price that’s about 66% above its 52-week low and 10% below the 52-week high.

CarMax Inc. (NYSE: KMX) has a median target price of $33 from 13 brokers. Shares are trading today at $27.76, for an implied gain of $5.24, or 19%. CarMax’s forward P/E is 14.06 and the company does not pay a dividend. The stock’s 52-week trading range is $22.77-$37.02, and at today’s price that’s about 22% above its 52-week low and 25% below the 52-week high.

America’s Car-Mart, Inc. (NASDAQ: CRMT) has a median target price of $37 from 5 brokers. Shares are trading today at $29.89, for an implied gain of $7.11, or 24%. Car-Mart’s forward P/E is 8.86 and the company does not pay a dividend. The stock’s 52-week trading range is $22.77-$37.50, and at today’s price that’s about 31% above its 52-week low and 20% below the 52-week high.

O’Reilly Automotive, Inc. (NASDAQ: ORLY) has a median target price of $68 from 19 brokers. Shares are trading today at $70.16, about 2% above its consensus target price. O’Reilly’s forward P/E is 17.12 and the company does not pay a dividend. The stock’s 52-week trading range is $52.97-$72.00, and at today’s price that’s about 32% above its 52-week low and 3% below the 52-week high.

AutoZone, Inc. (NYSE: AZO) has a median target price of $350 from 17 brokers. Shares are trading today at $326.17, for an implied gain of $23.83, or 7.3%. AutoZone’s forward P/E is 12.59 and the company does not pay a dividend. The stock’s 52-week trading range is $229.84-$337.23, and at today’s price that’s about 42% above its 52-week low and 3% below the 52-week high.

Pep Boys – Manny, Joe, and Jack (NYSE: PBY) has a median target price of $16 from 5 brokers. Shares are trading today at $10.95, for an implied gain of $5.05, or 46%. The Pep Boys’s forward P/E is 9.43 and the company pays a dividend yield of 1.1%. The stock’s 52-week trading range is $7.86-$15.96, and at today’s price that’s about 39% above its 52-week low and 31% below the 52-week high.

As you can see, there are some of the auto-related stocks that are close to or are now fully valued.  Still, there remains massive upside if the consensus analyst targets can be met.  Some upside targets are still so high that you have to wonder if they have been updated to reflect the new reality or if they are even really attainable.

Paul Ausick