On Wednesday, Lake Street Capital Markets adjusted its outlook for CarParts.com (NASDAQ:PRTS), reducing the price target to $2 from the previous $3 while keeping a Buy rating on the stock.
The firm's analyst cited several ongoing efforts by CarParts.com to enhance its business, including the improvement of its online and mobile app platforms, optimization of its product mix with strategic pricing, and investment in marketing.
Despite these initiatives, the company has faced significant challenges, as evidenced by a year-over-year decline in revenue, margins, and EBITDA. The analyst anticipates that the company's results will remain subdued in the near term.
CarParts.com has seen its gross margin improve sequentially; however, it is expected that the positive impact of the company's strategies will require more time to fully materialize and counterbalance the broader weaknesses within the business.
The analyst remains hopeful about the long-term potential of CarParts.com, particularly within the auto parts market, but acknowledges that any near-term improvements are unlikely to occur in 2024.
The reduction in the price target to $2 reflects the analyst's view that the current valuation, now below 0.1x revenue, is justified due to the persistent softness in the company's performance.
Despite this, the firm maintains a Buy rating, believing that any positive changes in the fundamentals could act as a catalyst for the stock.
The analyst emphasizes that the current market price does not fully account for potential improvements, suggesting that any advancement in the company's initiatives could positively influence the stock's performance.
In other recent news, CarParts.com has seen several significant developments. The company reported a 5% decline in sales for the first quarter of 2024, with revenues totaling $166 million.
This decrease is attributed to increased competition from low-cost, non-compliant parts, particularly in the lighting and mirrors categories. As a result, CarParts.com has initiated cost-saving measures projected to save up to $8 million in 2024 and $10 million annually.
Additionally, the company has revised its full-year revenue forecast to between $600 million and $625 million, with a focus on improving margins. RBC Capital Markets has adjusted its financial outlook for CarParts.com, reducing the price target to $2.00 while retaining an Outperform rating for the stock. Despite the revised expectations, RBC maintains a positive outlook, suggesting potential rewards for investors.
In a strategic move, CarParts.com has appointed Christina Thelin as its new Chief Marketing Officer. Thelin is expected to boost the company's marketing strategies and enhance customer experience and brand visibility.
InvestingPro Insights
As Lake Street Capital Markets revises its stance on CarParts.com (NASDAQ:PRTS), it's valuable to consider additional insights from InvestingPro. The company's market capitalization stands at a modest $57.83 million, reflecting its position in the market. A noteworthy InvestingPro Tip is the significant return over the last week, with a 9.09% increase, which could indicate a short-term positive momentum for investors. Additionally, CarParts.com trades at a low revenue valuation multiple, with a price-to-book ratio as of Q1 2024 at just 0.59, which might attract investors looking for undervalued stocks.
However, the challenges highlighted by the analyst are underscored by a couple of critical InvestingPro Tips: analysts have revised their earnings downwards for the upcoming period, and a sales decline is anticipated in the current year. These factors, combined with the expectation that net income is expected to drop this year, may give investors a reason for caution.
To gain further insights and access additional InvestingPro Tips that could help in making a more informed investment decision, consider visiting https://www.investing.com/pro/PRTS. There are 15 more tips available that could provide a deeper understanding of CarParts.com's financial health and market position. For those interested, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, offering an opportunity to stay ahead with comprehensive analysis and data.
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