Carsales.Com Ltd (ASX: CAR) shares have performed strongly in 2020. The Carsales share price has rocketed 21.3% higher this year despite a slump in the March bear market.
But for all of its success in recent times, is this ASX share a good option to buy for 2021?
Why the Carsales share price is climbing higher
The Carsales share price has been tearing higher thanks to a strong earnings result in August.
The ASX classifieds share hit a new record high after posting a 6% increase in adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA). Adjusted net profit after tax also jumped 6% to $138 million as the company paid a 25 cents per share final dividend.
The coronavirus pandemic has impacted operations but I think there are still some things to like about Carsales next year.
Can it repeat the trick in 2021?
One thing that is in Carsales’ favour is a shift in working behaviours around Australia. COVID-19 restrictions have forced a rethink of the daily commute including work from home arrangements and less public transport usage.
That increases the propensity for consumers to buy a car and potentially move further from CBD hubs.
That’s good news for classifieds businesses like Carsales which could receive an earnings boost.
One other factor is a surging Aussie dollar against the United States dollar. The vast majority of Australian cars are imported which could make them relatively more attractive with a strengthening currency.
In turn, we could see an increase in people trading up to newer models and taking advantage of the dollar increase. That’s good news for the Carsales share price if we see that persist into 2021.
On top of all that, we could also see increased turnover in the secondary market. As times get tough, many Aussies may look to sell their cars given the significant expense they represent.
I think Carsales is therefore well-placed to receive strong earnings from both the upside and downside in the Aussie economy.
Foolish takeaway
The Carsales share price has outperformed the S&P/ASX 200 Index (ASX: XJO) this year and I think it can be repeated in 2021.
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More reading
- Why Redbubble and this ASX share just stormed to record highs
- How the rising Aussie dollar could drive the Carsales share price to new all-time highs
- Why the Carsales share price is a recession-proof buy
- On a day when the ASX 200 is going nowhere, these popular “coronavirus shares” are hitting record highs
- 2 of the best ETFs for investing in ASX shares
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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