SAH · Sonic Automotive
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $72.69
Note written ·
Price against the kill line
18.2% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $72.69, on record since 11 November 2026. The shares are down 25.5% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $72.69, just over the 200-day average of closes, would show the shares leading the S&P 500 again. Fourth-quarter franchised-dealership segment income above the level of a year earlier would also show the call wrong.
Research onlyNot in the portfolio.
Key figures from the filings · Consumer Discretionary
Quarter to 30 September 2026, filed 29 October 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 3,989
- Revenue, change on a year (%)
- +0.4
- Gross margin (%)
- 15.5
- Operating margin (%)
- 2.8
- Net cash, cash less debt ($M)
- −1,739
- Price to earnings (×)
- 9.3
- Enterprise value to sales (×)
- 0.2
- Enterprise value to operating income (×)
- 7.3
All filed numbers
What Sonic Automotive reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 3,989 | +0.4 | 15.5 | 2.8 |
| first filed | 3,934 | +7.6 | 15.7 | 3.3 |
| first filed | 3,689 | +1.0 | 16.2 | 3.6 |
| first filed | 3,871 | −0.6 | 15.5 | 3.2 |
| first filed | 3,974 | +13.8 | 15.5 | 3.1 |
| first filed | 3,657 | +5.9 | 16.5 | −0.6 |
| Pre-tax income ($M) | 57.5 |
| Net income ($M) four quarters: 206 | 41.1 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −8.3 |
| Operating cash flow ($M) | 52.4 |
| Capital spending ($M) | Not available |
| Free cash flow ($M) | Not available |
| Cash and short-term investments ($M) | 10.7 |
| Debt ($M) long-term debt | 1,750 |
| Net cash, cash less debt ($M) | −1,739 |
| Deferred revenue ($M) | Not reported |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 392 |
| Inventory ($M) | 2,443 |
| Shareholders' equity ($M) | 1,062 |
| Market value ($M) | 1,915 |
| Enterprise value, market value plus net debt ($M) | 3,654 |
| Enterprise value to sales (×) | 0.2 |
| Enterprise value to operating income (×) | 7.3 |
| Price to earnings (×) | 9.3 |
| Price to book value (×) | 1.8 |
| Free-cash-flow yield (%) | Not available |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 7.6% of shares outstanding sold short, 7.8 days of average trading to cover, +4.2% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $4.6M | $0 |
| 12 monthsfrom | $10.6M | $9.6M |
The thesis
Sonic Automotive's shares are more likely to lag the S&P 500 than lead it over the next three months. Third-quarter 2026 adjusted earnings per share (EPS) of $1.30 missed the $1.67 estimate, and franchised-dealership income fell 22%. The fourth-quarter report, expected in early 2027, shows whether earnings have stopped falling.
The company reported on 29 October 2026. Adjusted EPS fell 8% from a year earlier. Revenue of $3,988.8 million set a quarterly record but missed the $4.027 billion estimate (Sonic's Form 8-K and Benzinga). The profit recovery that supported the shares' 2026 rally has not shown up in the results.
The shares closed at $63.23 on 11 November 2026 and $60.18 on 12 November 2026, after the earnings miss rather than ahead of it. The price now sits below the 4 November 2026 JPMorgan target of $58 only by a small margin, and above the October prices at which a 10% owner bought. The market has priced in lower earnings. It has not priced in a recovery.
Bullish and bearish views on Sonic Automotive, Inc.
The bull case on Sonic Automotive, Inc. (SAH), in brief: revenue and gross profit set records. The bear case: core dealerships earned less.
Bull case
- Revenue and gross profit set records. Third-quarter total gross profit reached a record $617.5 million (Quartr summary of the third-quarter release), and revenue rose 0.4% to a record $3,988.8 million (Form 8-K, 29 October 2026). Volume is intact even where profit per vehicle is not.
- A 10% owner kept buying. Paul Rusnak, a 10% owner, filed five Form 4s for open-market purchases between 1 October 2026 and 14 October 2026, at prices from $59.50 to $59.90 a share (SEC Form 4 filings). The last close of $60.18 is within about 1% of that range.
- EchoPark volume keeps growing. EchoPark revenue rose 14% to $596.0 million and retail used units rose 22% in the third quarter (Quartr summary, 29 October 2026). Adjusted segment income of $2.6 million was down only 4%.
- Powersports is growing. Segment revenue rose 35% to a record $113.7 million, and segment income rose 1% to $7.9 million (Form 8-K, 29 October 2026).
- Dividend raised. Sonic lifted its quarterly dividend to $0.41 from $0.38, payable 15 January 2027 to holders of record on 15 December 2026 (Form 8-K, 29 October 2026).
- Two brokers stay at Buy. Citigroup set a $98 target on 2 November 2026 and Needham set $96 on 30 October 2026. Both cut their targets after the report, and both remain far above the $60.18 close.
Bear case
- Core dealerships earned less. Franchised Dealerships segment income fell 22% to $47.6 million from $60.8 million in the third quarter (Form 8-K, 29 October 2026). The second quarter showed a 23% decline, so the contraction has run two quarters.
- Earnings missed on both lines. Adjusted EPS of $1.30 missed the $1.67 estimate, and revenue missed the $4.027 billion estimate (Benzinga, 29 October 2026). The second-quarter report had beaten both.
- EchoPark profit per vehicle fell again. Gross profit per unit was $2,972, down 12% from $3,359, while retail used units rose 22% (Form 8-K, 29 October 2026). Reported EchoPark segment income fell 23% to $2.0 million.
- Brokers kept cutting targets. JPMorgan (Underweight) lowered its target to $58 and Barclays (Equal-Weight) to $73 on 4 November 2026. Citigroup and Needham, both rated Buy, also cut after the report.
- EchoPark's near-term outlook is thin. A Quartr summary of the call puts EchoPark's fourth-quarter adjusted earnings before interest, taxes, depreciation and amortization at $2 million to $4 million, after $5 million to $7 million of added brand advertising. EchoPark opened in Orlando and launched its largest marketing campaign on 6 November 2026 (company news), which adds spending before it adds profit.
- The shares are still falling. They closed at $63.23 on 11 November 2026 and $60.18 on 12 November 2026, below both the 50-day and 200-day averages (adjusted daily closes).
Price setup
The shares closed at $60.18 on 12 November 2026. That is 47.1% below the 52-week intraday high of $113.67 set on 29 July 2026, and the three-month change is −25.1% (adjusted daily closes). The 52-week closing low is $58.28, set on 17 February 2026.
The 50-day average of closes is $64.99 and the 200-day average is $72.68, both as of 12 November 2026. The shares are below each. Over the last six sessions in the closes table the shares ranged from $60.18 to $63.23, so the post-earnings range has been narrow and the latest close is its lowest.
Among targets set after the 29 October 2026 report, JPMorgan's $58 is the only one below the close. Barclays' $73 sits above the 200-day average. Rusnak's October purchases at $59.50 to $59.90 sit just under the last close.
Catalysts ahead
- 15 December 2026: Record date for the $0.41 quarterly dividend (payable 15 January 2027). Confirms the 8% dividend increase is being paid despite lower quarterly earnings.
- ~February 2027 (est.): Fourth-quarter and full-year 2026 results. Tests whether franchised-dealership income and EchoPark gross profit per unit have stopped falling; EchoPark's fourth-quarter adjusted EBITDA outlook is $2 million to $4 million, per a Quartr summary of the call.
What would change the view
A daily close above $72.69, just over the 200-day average of closes, would show the shares leading the S&P 500 again. Fourth-quarter franchised-dealership segment income above the level of a year earlier would also show the call wrong.
What it trades with
Sonic trades with other US auto retailers and with used-vehicle price indexes, because profit per vehicle depends on used-car supply and financing margins. Higher interest rates and consumer credit stress weigh on both volume and finance-and-insurance income. Powersports is a smaller segment tied to recreational spending, and it has grown while the vehicle segments have contracted.
The evidence, claim by claim (8)
- Third-quarter 2026 adjusted diluted EPS were $1.30, down 8% from a year earlier; reported diluted EPS were $1.28, down 4%. Revenue was a record $3,988.8 million, up 0.4%. Sonic Automotive third-quarter 2026 results (Form 8-K exhibit 99.1) · as of
- Adjusted EPS of $1.30 missed the $1.67 estimate, and revenue of $3.988 billion missed the $4.027 billion estimate. Benzinga headline on Sonic Automotive third-quarter results · as of
- Franchised Dealerships segment income was $47.6 million, down 22% from $60.8 million a year earlier. Sonic Automotive third-quarter 2026 results (Form 8-K exhibit 99.1) · as of
- EchoPark gross profit per unit (used vehicle plus finance and insurance) was $2,972, down 12% from $3,359; EchoPark segment income was $2.0 million reported, down 23%. Sonic Automotive third-quarter 2026 results (Form 8-K exhibit 99.1) · as of
- Powersports revenue was a record $113.7 million, up 35%; segment income was $7.9 million, up 1%. Sonic Automotive third-quarter 2026 results (Form 8-K exhibit 99.1) · as of
- Sonic raised its quarterly dividend to $0.41 per share from $0.38, payable 15 January 2027 to holders of record on 15 December 2026. Sonic Automotive third-quarter 2026 results (Form 8-K exhibit 99.1) · as of
- Paul Rusnak, a 10% owner, bought 12,555 shares at $59.90 on 14 October 2026 and 13,701 shares at $59.78 on 7 October 2026, after earlier purchases at $59.50 to $59.90 on 1 October 2026, 5 October 2026 and 6 October 2026. SEC Form 4 filings, 6 October to 16 October 2026 · as of
- JPMorgan (Underweight) cut its target to $58 and Barclays (Equal-Weight) cut its target to $73 on 4 November 2026; Citigroup (Buy) cut to $98 on 2 November 2026 and Needham (Buy) cut to $96 on 30 October 2026. Benzinga analyst actions · as of
Sources
- SONIC AUTOMOTIVE INC - Form 8-K - FY2026 · sec.gov
- SONIC AUTOMOTIVE INC - Form 10-Q - FY2026 · sec.gov ·
- Sonic Automotive (SAH) Q3 2026 earnings summary · quartr.com