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.
ran up 2.1% in midday trading, and has gained 16.7% during its win streak. It’s on track to close at its highest price since it started trading on Jan. 15.
The company, which brands include Maaco and Meineke, was valued at $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 is the most bullish on Driven, as he initiated coverage with an overweight rating and 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 $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 of Driven’s IPO.
Credit Suisse’s Seth Sigman was the second-most bullish on Driven, as he started with an outperform rating and $38 stock price target.
“In addition to [Driven] having a strong model and consistent long-term track record, we believe that the company will be one of the best ways to navigate an out-of-home recovery over the next one to two years within our space, supported by our Aftermarket Miles Driven model and analysis of wallet share shifts during the pandemic,” Sigman wrote.
Sigman was also listed as an underwriter in Driven’s IPO.
Driven’s stock has rallied 23.4% since it closed Jan. 15 at $26.69, which was 21.3% above the IPO price. Over the same time, the Renaissance IPO exchange-traded fund
has climbed 9.4% and the S&P 500 index
has gained 3.9%.