Lithia Motors, Inc.
Thesis
Lithia Motors is positioned to capitalize on the growing demand for online automotive transactions through its Driveway business model, which leverages existing dealership infrastructure. The company's captive finance business, Driveway Finance Corporation, is expected to significantly enhance earnings per share by 2025. With a current share price of $306 and a projected price of $608.50 by 2026, this represents a compelling investment opportunity with a 23% IRR.
Did it work?
The long direction has been correct — LAD is up 21.0% over 35 months — but that annualizes to roughly 7%, far below the thesis's stated 23% IRR, and the stock remains nowhere near the $608.50 2026 target (~+99% implied from $306). With most of the stated horizon now elapsed, reaching the target would require an implausible surge, and the promised 2025 EPS uplift from Driveway Finance Corporation has not shown up in the kind of re-rating the thesis required. The investment generated a positive absolute return, but the core return expectation and catalyst timeline of the thesis have largely not played out.