Sonic Automotive's 13.65% Plunge: A Tale of Earnings Shock and Sector Turbulence

Summary
• Sonic Automotive (SAH) plunges 13.65% to $67.21, its worst single-day drop since 2020
• Q3 earnings miss estimates by $0.41/share, with EchoPark segment volume collapsing 8%
• Powersports segment surges 74% in adjusted EBITDA, yet fails to offset core business struggles
• Automotive retail sector under pressure as Autonation (AN) tumbles 2.61%

The market is reeling from Sonic Automotive's Q3 earnings report, which revealed a stark divergence between its high-growth Powersports division and struggling used-vehicle operations. With the stock trading at its lowest level since March 2023, investors are scrambling to assess whether this selloff signals a broader industry correction or a company-specific crisis. The 13.65% intraday drop—its largest since the 2020 pandemic crash—has sent shockwaves through the automotive retail sector.

Earnings Dislocation and Segment Divergence Spark Panic
Sonic Automotive's Q3 earnings report exposed a critical operational split: while the Powersports segment delivered record 74% adjusted EBITDA growth, the core Franchised Dealerships segment showed signs of strain. The EchoPark used-vehicle unit's 8% volume contraction—despite maintaining a $3,359 gross profit per unit—triggered margin compression that offset Powersports' gains. Management's failure to address EchoPark's structural issues, coupled with a 15% year-over-year increase in consolidated SG&A expenses, created a perfect storm. The $31 million non-recurring tax benefit from last year's period further distorted GAAP metrics, misleading investors who relied on adjusted EPS growth. This operational bifurcation, combined with rising interest expenses ($51.5M) and a 1.3% increase in SG&A as a percentage of gross profit, forced the market to reassess Sonic's capital allocation strategy.

Automotive Retail Sector in Turbulence as Autonation Falters
The automotive retail sector is under pressure as Autonation (AN) fell 2.61% alongside Sonic. This synchronized decline reflects broader industry challenges: rising inventory costs, shifting consumer preferences toward EVs, and margin compression in used-vehicle markets. While Sonic's Powersports segment outperformed peers with 55.8% SG&A efficiency, its EchoPark struggles mirror industry-wide used-vehicle market saturation. The sector's 1.36% turnover rate for Sonic suggests liquidity concerns, contrasting with Autonation's more diversified dealership portfolio. This divergence highlights the sector's fragility as dealerships grapple with inventory management and pricing pressures.

Bearish Positioning and Gamma-Driven Options Playbook
• 200-day MA: 71.926 (below current price) • RSI: 54.24 (neutral) • MACD: -0.515 (bearish crossover) • Bollinger Bands: 70.77–78.92 (price near lower band)

Technical indicators suggest a short-term bearish bias, with price testing the 52-week low of $52. The 30-day support/resistance at $74.87–75.12 has failed, opening the door for further downside. The 200-day MA at $71.93 acts as a critical psychological level; a break below $70.77 (lower Bollinger Band) could trigger a 10% acceleration.

Top Options Plays:
• SAH20251121P65 (Put, $65 strike, Nov 21):
- IV: 36.20% (moderate)
- Delta: -0.3588 (moderate sensitivity)
- Theta: -0.0236 (slow decay)
- Gamma: 0.0537 (responsive to price swings)
- Turnover: $27,740 (liquid)
- Payoff at 5% downside: $2.21/share
This put option offers balanced leverage with gamma-driven responsiveness, ideal for capitalizing on a potential $70.77 breakdown.

• SAH20251219P65 (Put, $65 strike, Dec 19):
- IV: 39.39% (attractive)
- Delta: -0.3837 (strong bearish exposure)
- Theta: -0.0229 (slow decay)
- Gamma: 0.0362 (moderate responsiveness)
- Turnover: $27,740 (liquid)
- Payoff at 5% downside: $2.21/share
This longer-dated put provides extended downside protection with higher IV, positioning for a potential 15% correction into year-end.

Aggressive bears should consider SAH20251121P65 into a breakdown below $70.77. If the 52-week low of $52 is tested, SAH20251219P65 offers extended exposure.

Backtest Sonic Automotive Stock Performance
I tried to complete the event-study back-test exactly as you requested:1. Pulled every daily OHLC bar for SAH.N between 2022-01-03 and 2025-10-22. 2. Calculated, for each session, the intraday draw-down from the previous day’s close: draw-down = (low – previous_close) / previous_close. 3. Flagged as an “event day” any session whose intraday fall was at least –14 % (≤ –0.14). 4. Sent the resulting event-date file to the event_backtest_engine to measure SAH’s subsequent performance.However, the back-test engine returned an internal error. After checking the intermediate file, I found that the event-date list is empty – SAH has not experienced a ≥ 14 % intraday drop relative to the prior close at any time between January 2022 and today. Because there are zero events, the engine’s statistics routine tried to compute a standard deviation on an empty list and crashed (division-by-zero).In short, there are simply no qualifying –14 % intraday plunges in the sample period, so the requested back-test cannot be run as-is.How would you like to proceed?• We can relax the threshold (e.g., –10 % or –8 %) to capture more events and perform the analysis. • Alternatively, we could look at closing-price moves rather than intraday lows. • Or we can analyse a different stock or a different time-span.Let me know your preference and I’ll set up a revised test right away.

Critical Crossroads: Watch for $70.77 Breakdown or Powersports Rebound
Sonic Automotive's 13.65% collapse has created a pivotal inflection point. The stock's proximity to its 52-week low and deteriorating SG&A efficiency suggest further downside risks, particularly if EchoPark's volume weakness persists. However, the Powersports segment's 74% EBITDA growth and 55.8% SG&A efficiency present a compelling long-term story. Investors should monitor the $70.77 lower Bollinger Band as a critical support level—breaking this could trigger a 10% acceleration toward $52. In the near term, the sector's performance, led by Autonation's -2.61% decline, will be a key barometer. Aggressive positioning in SAH20251121P65 offers a high-probability play on a potential $70.77 breakdown.