We expect AutoNation (AN) to be hurt by a continuing weak new car market. The company is disproportionately exposed to Florida and California, states that will be hit the most by a slowing car market.

Moreover, the credit crisis in the U.S. led to a 22% decline in AutoNation's sales followed by a 32% decline in net profits in the third quarter of 2008. AutoNation's higher debts and interest charges are also a major cause of concern.

Tight credit and slumping U.S. demand are expected to continue to affect sales and thereby margins in the near term. As a result, we rate the shares a SELL with a target of $4.50.