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On Wednesday, BofA Securities adjusted its outlook on Driven Brands (NASDAQ:DRVN), increasing the price target from $20.00 to $23.00 while maintaining a Buy rating on the company’s shares. Currently trading at $18.47, near its 52-week high of $18.51, the stock has shown remarkable strength with a 60% return over the past year. The revision reflects a positive assessment of the company’s financial strategy and market position. According to InvestingPro analysis, the stock is currently fairly valued based on its proprietary Fair Value model.
Elizabeth L Suzuki of BofA Securities provided insights into the rationale behind the price target adjustment. According to Suzuki, Driven Brands’ direct exposure to tariffs is minimal due to its status as a service company, which primarily purchases goods under the United States-Mexico-Canada Agreement (USMCA). While a downturn in consumer sentiment could potentially affect discretionary services like those offered by Maaco, a subsidiary of Driven Brands, there may be compensating factors at play. Suzuki suggests that a decline in new car sales could actually benefit Driven Brands, as an older vehicle fleet on the roads would likely necessitate more repair services.
The analyst also highlighted the company’s financial maneuvers, noting Driven Brands’ effective use of proceeds from U.S. car wash sales. With annual revenue of $2.37 billion and a healthy gross profit margin of 42%, the company has managed to pay down a significant portion of its debt, totaling $290 million this year. This progress is in line with Driven Brands’ objective to achieve a leverage ratio of 3x or lower by the end of 2026. InvestingPro subscribers can access detailed financial health metrics and 12+ additional ProTips about DRVN’s debt management strategy.
Driven Brands, with a market capitalization of $3 billion, has positioned itself strategically within the automotive service industry, focusing on essential and repair services that are less sensitive to changes in consumer spending patterns. The company’s ability to reduce its debt enhances its financial stability and potentially its attractiveness to investors. InvestingPro’s Financial Health Score rates the company as ’FAIR’, suggesting balanced operational performance.
The updated price target and sustained Buy rating from BofA Securities signal confidence in Driven Brands’ business model and its ability to navigate the current economic climate. With analyst price targets ranging from $16 to $25 and a consensus Buy recommendation, the company’s focus on reducing leverage and capitalizing on opportunities presented by an aging vehicle population are key factors cited in support of the positive outlook.
In other recent news, Driven Brands Holdings Inc. has completed the sale of its U.S. car wash operations to Whistle Express Car Wash for $385 million. The transaction includes a $255 million cash payment and a $130 million interest-bearing seller note, with proceeds earmarked for debt reduction. Additionally, Driven Brands has implemented a new segment reporting structure effective from the first quarter of 2025, aiming to provide clearer insights into its operations. This reorganization highlights the Take 5 Oil Change as a separate reportable segment and consolidates stable franchise businesses into a single segment.
Stifel analysts have maintained a Buy rating for Driven Brands, with a price target of $22. Their analysis aligns with the company’s newly structured business segments, reflecting confidence in the company’s strategy. Furthermore, Driven Brands announced an amendment to its revolving credit facility, extending its maturity to 2030, which provides the company with continued operational flexibility. The extension is subject to certain conditions, including a springing maturity provision and financial maintenance covenants.
In leadership news, Driven Brands appointed Rebecca Fondell as the new Senior Vice President and Chief Accounting Officer. Fondell brings extensive experience from her previous roles at Papa John’s International (NASDAQ:PZZA) and Reliance Worldwide Corporation. Her compensation package includes an annual base salary of $400,000, performance-based bonuses, and equity grants, along with a sign-on bonus. These developments reflect Driven Brands’ strategic initiatives and ongoing efforts to strengthen its financial and operational standing.
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