because its analysis shows there is a strong correlation between property prices and new vehicle sales, with the “wealth effect” a big influence. When house prices soar people feel more confident in spending, but the opposite also happens. UBS analyst Tim Piper says analysis of past cycles shows a “very strong correlation between car sales and house prices”.
A confluence of factors has made it difficult to make forecasts about Australia’s new car market. Supply chain disruptions from COVID-19 and a global shortage of semiconductors meant wait times for many new car buyers blew out to 12 months early this year., but some buyers are still forced to wait six months.Macquarie has an “outperform” rating on Eagers and a 12-month share price target of $17. That’s a long way from Friday’s closing price of $11.57. Eagers slumped to $8.
“High gross margin order books of seven-plus months underwrite much of the upcoming reporting periods,” Macquarie said. This in turn should underpin strong profit growth, although the broker said it was “mindful of macro headwinds potentially impacting demand in calendar 2023″. Eagers is also pushing ahead with its used vehicle brand Easyauto123. In that business, sales volumes were up 58 per cent between January 2021 and June 2022.