2 Auto Retailers Stocks to Buy as Car Prices Continue to Soar

imageStock Markets20 minutes ago (Jul 02, 2021 05:30PM ET)

(C) Reuters. 2 Auto Retailers Stocks to Buy as Car Prices Continue to Soar

Car prices are nearing record highs owing to rising demand amid a supply shortage. And because car inventories are expected to remain low given a global semiconductor chip shortage, car prices should continue to rise in the near term, boosting the profit margins of auto retailers CarGurus (NASDAQ:CARG) and (CARS). So, as such, we think it could be wise to bet on these stocks now.The pandemic-driven global industrial shutdown last year resulted in the slow down or idling of automobile plants. A global semiconductor chip shortage has depressed automobile production significantly too. But the demand for new cars has been rising sharply over the past couple of months. This is evident in a 34% year-over-year rise in new car sales in May, compared to a 10.6% growth in May 2019.

As of May, the average new car price hit a record $38,255, 12% higher from the same period last year. In the used car market, prices are up 39% since the beginning of this year. This trend is expected to continue, owing to low car inventories amid surging demand.

Given this backdrop, we think shares of auto retailers CarGurus, Inc. (CARG) and Inc. (CARS) are well positioned to deliver solid returns in the coming months.

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2 Auto Retailers Stocks to Buy as Car Prices Continue to Soar

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