Risk Reward Update: Lithia Motors Inc. | North America

Research evidence excerpt

Risk Reward Update: Lithia Motors Inc. | North America

UpdateM

Risk Reward – Lithia Motors Inc. (LAD.N)

KEY EARNINGS INPUTS

Drivers Dec 2025 Dec 2026e Dec 2027e Dec 2028e

New Vehicles: % Same Store Sales

(0.7) 0.0 1.0 1.0

(%)

Used Vehicles: % Same Store Sales

(1.4) (0.2) 1.0 1.0

Parts & Services: % Same Store

2.5 3.5 4.5 4.5

Sales (%)

Finance & Insurance ($) 1,829 1,775 2,030 2,065

SG&A as % of Gross Profit (%) 68.7 70.2 68.5 66.5

INVESTMENT DRIVERS RISKS TO PT/RATING MS ESTIMATES VS. CONSENSUS

RISKS TO UPSIDE FY Dec 2026e

Accelerating same-store comps US Saar/Used Car Data 33.45

Accretive acquisitions EPS

Omnichannel rollout 33.37 35.52

Go-to-market strategy on omni-channel/digital ($)

Acquisition strategy playing out in the long term 34.48

RISKS TO DOWNSIDE

Auto & Auto Credit CycleGLOBAL REVENUE EXPOSURE US

Inability to continue to find acquisitions in line Sales / 38,291

with historical targets Revenue 37,465 39,491

($, mm) 38,364 10-20% UK Expectations on omni-channel potentially too

80-90% North America high near-term

Risk of extending M&A strategy of brick and

1,568

mortar during the digital age playing out EBITDA

1,565 1,950

Source: Morgan Stanley Research Estimate ($, mm) 1,726

View explanation of regional hierarchies here OWNERSHIP POSITIONING

Inst. Owners, % Active 61% 783

MS ALPHA MODELS Net income

HF Sector Long/Short Ratio 1.7x ($, mm) 760 821

2/5 24 Month 2/5 3 Month HF Sector Net Exposure 11.1%

BEST Horizon MOST Horizon

Refinitiv; MSPB Content. Includes certain hedge fund Mean Morgan Stanley Estimates

Source: Refinitiv, FactSet, Morgan Stanley Research; 1 is exposures held with MSPB. Information may be Source: Refinitiv, Morgan Stanley Research

the highest favored Quintile and 5 is the least favored inconsistent with or may not reflect broader market