Shares of Driven Brands Holdings Inc. rallied toward a fifth-straight gain Tuesday, after the newly public auto services company got a mostly bullish endorsement from Wall Street analysts, as a way to play the recovery in the auto industry.
The stock DRVN has gained 16.7 percent during its win streak. IAs of Wednesday at 1:30 p.m. ET, DRVN shares were trading at 32.91 per share after closing at 32.25 on Tuesday.
The company, which brands include Maaco and Meineke, was valued at US$3.74 billion when its initial public offering priced at $22. At current share prices, Driven’s market capitalization has ballooned to $5.4 billion.
J.P. Morgan analyst Christopher Horvers appears to be the most bullish on Driven, as he initiated coverage with a Street high $39 stock price target.
As the auto services industry recovers from COVID-19’s impact, Horvers said increasing miles driven support an accelerating pace of due-in-for-maintenance (DIFM) spending. In addition, the timing of vaccinations and the lagging nature of Driven’s collision business should result in “well-above normal” sales trends through the first half of 2022.
“[A]ll segments should see continued topline improvement as further restrictions on mobility are lifted and consumers return to normalized vehicle usage and travel,” as recent data show that miles driven are still down from high-single-digits to low-double-digits percentage ranges, Horvers wrote in a note to clients.
In all, nine analysts surveyed by FactSet have initiated coverage of Driven, with six analysts starting with the equivalent of buy ratings and three analysts with holds. The average price target is $35.13, which is 6.7% above current prices.
Analyst Elizabeth Suzuki at BofA Securities kicked off coverage of Driven with a buy rating and a $36 stock price target. Being the “largest automotive franchise operator in a fragmented industry,” Suzuki said she views the company as “an industry consolidator” with a strong brand portfolio and an attractive margin profile.
“We expect [Driven] to continue to grow at a pace well above the broader auto aftermarket over the medium term, while benefiting from industry recovery coming out of the pandemic as drivers get back on the road,” Suzuki wrote. “With [market] share only in the low-single digits in most segments, [Driven] has a long road for growth.”
Both J.P. Morgan and BofA Securities were among the lead underwriters on Driven Brand’s IPO.
