Motorpoint (MOTR) 174p

Gain to date: 25.2%

We highlighted the recovery potential of nearly-new vehicles retailer Motorpoint (MOTR) at 139p on 20 June 2024. The used car dealer had just emerged from its toughest year in a quarter of a century, but we saw numerous upside catalysts in place with the company back in profit and market conditions improving. UK interest rates looked to have peaked, while key competitors, notably collapsed online car dealer Cazoo, had exited the marketplace.

Crucially, Shares was reassured by a balance sheet strong enough for Motorpoint to absorb any unforeseen shocks.

WHAT HAS HAPPENED SINCE WE SAID BUY?

Motorpoint’s shares have revved up 25.2%, buoyed by the Bank of England’s August rate cut - the same month that the company achieved its highest performing retail volume since March 2022 by the way. Lower borrowing costs have put consumers in a better position to press the button on big-ticket purchases, while Mark Carpenter-steered Motorpoint’s positive half-year trading update (8 October) confirmed the company is back in the fast lane.

Derby-headquartered Motorpoint returned to profitability in the six months ended 30 September 2024 on strong retail volume growth of 17%. And though the supply of nearly-new vehicles remained constrained, used car prices and margins were ‘broadly stable’ in the period and Motorpoint’s stock turn materially improved.

WHAT SHOULD INVESTORS DO NOW?

Keep buying one of the few remaining London-listed automotive retailers, which is opening stores once again and well placed to reaccelerate growth. Motorpoint has guided for first half pre-tax profits of £2 million and the full year consensus analyst forecast of £4 million looks conservative.

Earnings upgrades could be on the way if momentum stays strong with the business and the Bank of England cuts rates again in the months ahead, leaving consumers feeling more confident about their finances.

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