On Monday, BMO Capital initiated coverage on Driven Brands (NASDAQ:DRVN) stock with a Market Perform rating and a price target of $14.00. The automotive service company, which offers oil changes, car washes, and collision/glass repair, is facing some challenges according to the firm. The new coverage reflects caution due to the headwinds in the car wash sector and the recent underperformance of the company.
The firm noted that Driven Brands is in the early stages of integrating its newly-acquired glass business and is also dealing with recent management changes, including the departure of its CFO. These factors contribute to the analyst's decision to adopt a "wait and see" stance toward the company's stock.
Despite these concerns, BMO Capital acknowledged the significant untapped potential for Driven Brands to cross-sell its services across its customer base. The company's diverse portfolio in the automotive service industry could present opportunities for growth if effectively leveraged.
However, BMO Capital is looking for more tangible results before changing its rating. The firm's current stance is to monitor Driven Brands' performance closely, particularly how it navigates its current challenges and capitalizes on its cross-selling opportunities.
In other recent news, Driven Brands has been the subject of multiple analyst adjustments and has reported growth in its Q1 2024 earnings. RBC Capital and Piper Sandler both lowered their price targets for Driven Brands to $14.00, while maintaining positive ratings. The CFO's departure for the second time in less than a year was a significant factor in these adjustments.
Despite these changes, Driven Brands reported a modest revenue increase of 1.7% year-over-year in its Q1 2024 earnings call, bolstered by the addition of 144 net new stores and a 0.7% growth in same-store sales.
RBC Capital revised its revenue growth estimates for Driven Brands for full-year 2024 to 3.4% and for full-year 2025 to 8.0%. The firm also set its adjusted EBITDA estimates at $553 million for full-year 2024 and $608 million for full-year 2025. These are the latest developments in the company's performance and market outlook.
InvestingPro Insights
In light of BMO Capital's recent assessment of Driven Brands, the company's financial health and market performance are crucial for investors to consider. According to the latest data from InvestingPro, Driven Brands has a market capitalization of $2.18 billion, indicating its size and significance in the sector. The company's revenue has grown by 8.76% over the last twelve months as of Q1 2024, showing resilience in its operations. Despite a challenging market, Driven Brands has maintained a solid gross profit margin of 40.82% in the same period, which could be a testament to its competitive pricing power and operational efficiency.
InvestingPro Tips suggest that while the P/E ratio is currently negative, reflecting earnings challenges, the revenue growth and gross profit margins may offer a silver lining for potential investors. Additionally, the company's fair value, as estimated by InvestingPro, stands at $12.25, which is slightly below the current market price. This could indicate that the stock is fairly valued or has limited upside potential at its current price. For those seeking deeper insights and additional tips, InvestingPro offers a range of analytics; there are PRONEWS24 more tips available for users who subscribe to the service using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
As Driven Brands aims to navigate its integration and management changes, these financial metrics and expert tips could provide valuable guidance for investors considering this stock in the competitive automotive service market.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.