BofA Securities analysts expect more investor attention to be drawn to Driven Brands Holdings Inc's winning combination of a roll-up story in a recovering/reopening auto aftermarket.
In an update to clients after attending the company’s analyst day, they noted that Driven Brands plans to reduce its near-term growth pace to fix current challenges and reduce debt.
"Smaller auto aftermarket companies are at a disadvantage in handling challenges with rising operating costs, the demands of supply chain management, and increasing vehicle complexity," the analysts wrote.
"We view the environment as favorable for industry consolidators like Driven Brands that can leverage their scale, data, and balance sheet organically gain market share."
They added, however, that Driven Brands is pausing M&A and growth in its car wash business to de-lever its balance sheet but believe the company has a great portfolio of brands across multiple auto maintenance categories for any environment.
Analysts at BofA reduced their price objective for Driven Brands stock to $31 per share from $36, citing a slower expected medium-term EBITDA growth pace, but reiterated their ‘Buy’ rating as they believe the company's long-term growth outlook remains intact.
Shares of Driven Brands eased 1% to $13.13 in midday trading on Friday.
Contact Sean at sean@proactiveinvestors.com