BofA Upgrades Mister Car Wash (MCW) to Buy, Downgrades O'Reilly Automotive (ORLY) to Neutral and Snap-On (SNA) to Underperform on Valuation

September 17, 2021 8:05 AM EDT
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Price: $17.33 +0.06%

Rating Summary:
    4 Buy, 4 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 15 | Down: 25 | New: 91
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BofA analyst Elizabeth Suzuki made three rating calls in the bank’s research coverage of retailing-hardline car companies.

The analyst upgraded Mister Car Wash (NYSE: MCW) to Buy from Neutral with a $23.00 per share price target.

“We view MCW as well-positioned to benefit from several themes highlighted in our Owner’s Manual auto aftermarket primer: 1) gradual recovery in miles driven and the recovery of auto service that will follow, 2) protection against online disruptors and vehicle electrification, and 3) industry consolidation favoring larger chains,” Suzuki said in a client note.

“MCW is a well-run company with a strong financial track record and significant potential for growth, as it owns less than 5% of all US conveyor car wash locations today. We believe that a valuation multiple at a premium to peers to the auto aftermarket and more in line with other subscription providers (>60% of MCW revenue is from unlimited car wash subscribers) is warranted.”

On the other side, Suzuki downgraded O’Reilly Automotive (NASDAQ: ORLY) to Neutral from Buy with a price target of $680.00 per share.

“O’Reilly Automotive (ORLY) is a high-quality auto parts retailer with a balanced mix of DIY customers (about 55% of sales) and DIFM customers (about 45% of sales). With the stock now trading at a P/E of about 21x our ‘22E, there is now only about 13% upside to our price target,” Suzuki added.

Finally, the analyst moved lower on the rating scale to Underperform (from Neutral) on Snap-On (NYSE: SNA) on chip shortage issues and high valuation. The price target remains at $240.00 per share.

“While we see several tailwinds for SNA in the next 12 months, primarily the recovery of the professional auto service channel, we also see risk that auto dealers experiencing near-term pressure on new vehicle sales due to supply shortages will pull back on investments in high-end tools and equipment temporarily. With the stock now trading at a P/E of about 15x our ‘22E, we expect shares to underperform other stocks in our coverage universe where valuation appears more attractive,” Suzuki concluded.

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