On Wednesday, Citi adjusted its stance on Autohome Inc. (NYSE: ATHM), reducing the price target to $26 from the previous $28 while maintaining a Neutral rating on the stock. The revision follows Autohome's second quarter results for fiscal year 2024, which showed revenues and adjusted earnings slightly above Citi's and consensus estimates. The earnings beat was attributed to a higher-than-expected Gross Profit Margin (GPM), which remained robust despite a decline in advertising revenues from Original Equipment Manufacturers (OEMs).
Looking ahead into the second half of 2024, management at Autohome has indicated ongoing uncertainties, particularly concerning a price war that could continue to pose challenges for the OEM advertising and used car segments. These factors may outweigh the positive aspects of the company's data products for dealers. In response to the evolving market conditions, Autohome is upgrading its strategy to include an expansion into lower-tier markets through offline New Energy Vehicle (NEV) stores and satellite stores.
Citi's revised earnings estimates for Autohome for the years 2024, 2025, and 2026 reflect an increase of 4% for 2024 but a decrease of 1% and 2% for the subsequent years. This adjustment is based on the better-than-expected GPM countered by a less optimistic outlook for OEM advertising revenues. The new price target of $26 factors in these updated earnings projections and rolls over to the 2025 estimates.
Despite the tempered expectations for Autohome's core advertising business, Citi suggests that the stock's dividend yield, which stands at 7%, could provide a floor for the share price. The firm's neutral stance on Autohome's fundamentals reflects a balanced view of the company's current financial health and market position.
InvestingPro Insights
Autohome Inc. (NYSE: ATHM) has been navigating a complex market landscape, with Citi's recent price target adjustment reflecting the nuanced performance and expectations for the company. To provide a deeper understanding of Autohome's financial position, InvestingPro data indicates a market capitalization of approximately $2.95 billion, with a P/E ratio standing at 13.24, which adjusts to 11.64 when considering the last twelve months as of Q1 2024. The gross profit margin during this period was notably high at 82.4%, underscoring the company's effective cost management.
InvestingPro Tips reveal that Autohome holds more cash than debt, suggesting a strong balance sheet, and has maintained dividend payments for five consecutive years, demonstrating a commitment to shareholder returns. However, it's worth noting that analysts have revised their earnings downwards for the upcoming period, which may influence investor sentiment. With the company trading near its 52-week low, there may be potential for value investors to consider this as an entry point, especially given that analysts predict profitability this year.
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