Deutsche Bank Upgrades Asbury Automotive (ABG) to Buy; Valuation Looks Attractive

March 19, 2009 8:39 AM EDT

Deutsche Bank upgrades Asbury Automotive (NYSE: ABG) from Hold to Buy. Price target increased from $5.50 to $7.

Deutsche analyst says, "We have long viewed the Auto Retail business as one of the most compelling parts of the Automotive Value Chain, given benefits from brand diversification, less cyclical parts / service business, and considerable discretion over capital spending and inventory levels, which helps mitigate cash burn during downturns. We have particularly liked the position of ABG. Nonetheless, we had until now been unable to gain conviction in ABG's ability to sustain profitability, and stay clear of leverage covenants, through this severe downturn...ABG's performance during 4Q08 has helped mitigate many of the reservations we had regarding the company's ability to withstand a severe downturn. New disclosures regarding ABG's cost savings provide us with increased confidence in the company's ability to maintain profitability, and flat to positive cash flow through the severely depressed demand levels. And we also believe the combination of cost savings and debt repurchases have bought the company additional breathing room on its covenants."

Asbury Automotive Group, Inc. (Asbury) is an automotive retailer in the United States.

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