Autohome slides 8% as BofA, Citi downgrade on competition and auto headwinds

Autohome lower in NYSE trading and pacing for a four-year low after downgrades at Citi and BofA.

BofA cut the stock two notches to Underperform, from Buy, saying the investment story has changed “from a solid online vertical market leader that is resilient throughout auto industry cycle to a weakening market leader suffering from auto industry headwinds and competition.”

Auto market cyclicality could mean prolonged headwinds, and competition for auto spend is intensifying, providing a negative impact for Autohome, it says.

The company’s near-term performance will also take a hit from business adjustments, including the rollout of its Blue Sky program to screen leads, the end of off-line insurance referrals, and changing out senior management.

It has a price target of $46, now implying just 7% upside after today’s drop.

Meanwhile, Citi is downgrading to Neutral and expecting a miss on top and bottom lines in the company’s August earnings report.

It also cites more intense competition, “muted” auto budgets and a strategic shift.

There’s still big gap in user scale between Autohome and rivals, “which should give ATHM some time for its strategic shift to find new growth drivers in our view.” The company will likely explore opportunities in the used car market, “booming” NEV sector, more cooperation with Ping An Group, data products and overseas expansion, Citi says.

It’s cut its target price to $52 from $112.

Author: Jason Aycock, Seeking Alpha

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