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Investing.com - Canaccord Genuity raised its price target on Driven Brands (NASDAQ:DRVN) stock to $24.00 from $23.00 on Friday, while maintaining a Buy rating. The stock, currently trading at $17.24, appears undervalued according to InvestingPro analysis, with analysts’ targets ranging from $17 to $25.
The research firm’s decision follows a survey of 51 oil change locations, including 41 Take 5 and 10 Valvoline (NYSE:VVV) sites, which showed improving consumer trends compared to April. The survey assessed recent business performance, daily service volume, promotional activity, and whether consumers were deferring maintenance due to economic concerns. This positive trend aligns with the company’s solid financial performance, maintaining a healthy 42% gross margin and achieving 6.76% revenue growth in the last twelve months.
Canaccord found promotional activity remained stable with only one Take 5 location changing its promotional strategy since April. The number of vehicles serviced daily has increased as consumer sentiment improved from April lows, demonstrating the resilience of this needs-based business. Get deeper insights into Driven Brands’ performance metrics and growth potential with a comprehensive Pro Research Report, available exclusively on InvestingPro.
The survey revealed 80% of locations reported customers were not deferring oil changes due to economic concerns, up from 73% in April, suggesting strengthening consumer confidence in the automotive maintenance sector.
Canaccord believes previous challenges in Driven Brands’ capital-intensive businesses like Car Wash had overshadowed strengths in its asset-light franchised Maintenance business, particularly Take 5 Oil Change, which generates superior cash flows. The firm expects DRVN’s multiple can "materially expand" following the U.S. Car Wash divestiture and as investor confidence returns.
In other recent news, Driven Brands Holdings Inc. completed the sale of its U.S. car wash operations to Express Wash Operations, LLC for $385 million. The transaction included a $255 million cash payment and a $130 million interest-bearing seller note, with proceeds aimed at reducing the company’s debt. This strategic move allows Driven Brands to focus more on its Take 5 Oil Change brand and other franchise businesses. Additionally, Driven Brands has appointed Rebecca Fondell as the new Senior Vice President and Chief Accounting Officer, bringing extensive experience from her previous roles at Papa John’s International (NASDAQ:PZZA) and Reliance Worldwide Corporation.
In financial developments, BofA Securities raised Driven Brands’ stock price target from $20.00 to $23.00, maintaining a Buy rating. The firm cited the company’s minimal tariff exposure and strategic debt reduction efforts as positive factors. Meanwhile, Goldman Sachs has assumed coverage with a Neutral rating, noting the company’s simplified operations post-divestiture but lacking a clear catalyst for stock re-rating. Driven Brands also reported the re-election of three Class II directors and approval of executive compensation at its recent annual stockholders meeting. These developments reflect Driven Brands’ ongoing efforts to streamline operations and strengthen its financial position.
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