The market diversion of Penske Automotive Group Inc (NYSE:PAG), a dealership company that sells passenger vehicles and trucks, is "valuable," while its parts and service business has higher exposure to the premium/luxury segment, "which has a more resilient demographic of higher income consumers," according to BofA Securities.

The Penske Automotive Group Analyst: Analyst Alexander Perry reinstated coverage with a Buy rating and price target of $195.

The Penske Automotive Group Thesis: The company's largest business is premium and luxury vehicles, representing 73% of its automotive mix, Perry said in the reinitiation note.

This is an advantage, as it "reduces the risk associated with price increases related to tariffs and enhances growth opportunities for parts and service (P&S) given increases in vehicle complexity & technology," he wrote.

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Penske Automotive Group is likely to benefit from luxury consumers seeking dealers for parts and services, which supports the company's margins and reduces cyclicality, the analyst stated.

While the fourth-quarter luxury volumes may be softer, the issues are "transitory" and the longer-term thesis remains intact, he further said.

PAG Price Action: Shares of Penske Automotive Group had risen by 0.96% to $165.77 at the time of publication on Tuesday.

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