Raymond James sets $10 price target on Mister Car Wash stock

On Wednesday, Raymond (NSE:RYMD) James initiated coverage on Mister Car Wash (NYSE:MCW) Inc. (NASDAQ:MCW) with an Outperform rating and a $10.00 price target, suggesting approximately a 27% upside potential. The firm’s analysis highlights Mister Car Wash’s small yet significant presence in the highly fragmented U.S. car wash industry, where it currently holds about 1% market share. The top 50 operators collectively hold around 8% of the market. According to InvestingPro data, the company commands a market capitalization of $2.5 billion, with analyst targets ranging from $6 to $11 per share. InvestingPro analysis indicates the stock is currently trading above its Fair Value.

The company is seen as well-positioned to take advantage of premiumization trends and opportunities to increase market share through organic growth, selective mergers and acquisitions, and expanded membership penetration. Despite recent challenges such as competition and rising costs impacting performance, Raymond James notes signs of cost stabilization and a more rational industry environment. The company has demonstrated solid revenue growth of 7.3% over the last twelve months, with a gross profit margin of 32.75%, according to InvestingPro data.

The analyst’s statement underscores the company’s growing Titanium 360° service penetration, which stands at 23% and is on the rise. This, along with disciplined expansion of new units and increased Ultimate Wash Club (UWC) penetration, which accounts for 75% of revenue, is expected to drive substantial revenue and EBITDA growth for Mister Car Wash. The firm projects a three-year EBITDA compounded annual growth rate (CAGR) of 9%. Current EBITDA stands at $273 million, with 11 analysts recently revising their earnings estimates upward for the upcoming period, as reported by InvestingPro.

Mister Car Wash’s strategy for growth appears to be multifaceted, focusing on enhancing its membership base while also expanding its physical footprint. The emphasis on premium services like Titanium 360° and the Ultimate Wash Club is set to play a crucial role in the company’s financial performance moving forward.

The Outperform rating by Raymond James reflects confidence in Mister Car Wash’s potential to outperform the broader market, based on the outlined growth strategies and market conditions. The price target of $10.00 takes into account the company’s ability to capitalize on its current market position and expand its reach in the coming years.

In other recent news, Mister Car Wash Inc. reported its fourth-quarter 2024 earnings, surpassing expectations with an earnings per share (EPS) of $0.09, compared to the forecasted $0.07. The company also reported a 9% increase in net revenues, amounting to $251 million for the quarter, driven by strategic innovations and expansion efforts. Over the full year, Mister Car Wash achieved a revenue of $1 billion, marking a 7% increase from the previous year. The company’s EBITDA for the quarter was $78 million, up 13%, while the full-year EBITDA reached $321 million, reflecting a 12% year-over-year growth.

Stifel analysts recently adjusted their outlook on Mister Car Wash, increasing the price target to $8.50 from $8.00, while maintaining a Hold rating. This revision follows Mister Car Wash’s announcement of stronger-than-anticipated same-store sales and EBITDA for the recent quarter. The company reported a 6% rise in same-store sales, outperforming both Stifel’s and the consensus estimates. Despite these positive results, the company expressed caution in its outlook for the year, citing weather impacts on performance and hesitated to predict a robust recovery in retail sales.

Mister Car Wash also announced plans to expand its marketing efforts and increase pricing for its Base Unlimited Wash Club package, which is expected to enhance margins. Additionally, the company opened 40 new locations, surpassing the 500-store milestone, and launched a new Titanium membership service that contributed to revenue growth.

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