Stifel raises Mister Car Wash price target to $8.50, retains hold

On Thursday, Stifel analysts adjusted their outlook on Mister Car Wash (NYSE:MCW) Inc. (NASDAQ:MCW), increasing the price target to $8.50 from the previous $8.00, while maintaining a Hold rating on the company’s shares. The revision follows Mister Car Wash’s announcement of stronger-than-anticipated same-store sales (SSS) and EBITDA for the recent quarter. According to InvestingPro data, the company currently trades at $8.02 with a market capitalization of $2.57 billion, and analysis suggests the stock is currently overvalued.

Mister Car Wash reported a 6% rise in SSS, outperforming both Stifel’s projection of 3.5% and the consensus estimate of 3.1%. The company’s quarterly EBITDA also surpassed expectations, contributing to a robust trailing twelve-month EBITDA of $272.73 million. The company achieved total revenue of $994.73 million with a 7.3% growth rate. This financial performance was attributed to an uptick in retail wash sales and a roughly 2% year-over-year growth in Unlimited Wash Club (UWC) memberships.

Despite the positive results, the company exercised caution in its outlook for the year, citing the significant impact of favorable weather on its fourth-quarter and year-to-date performance. Management hesitated to predict a robust recovery in retail sales for the remaining months of the year.

Stifel’s analysts acknowledged the positive results but expressed a desire for more evidence of sustained improvement before adopting a more bullish stance. Mister Car Wash also announced plans to ramp up marketing efforts following successful test programs in the fourth quarter. Additionally, the company intends to increase the pricing for its Base UWC package, which is expected to enhance margin performance. However, there is a concern that this change may lead to higher customer churn rates.

In summary, while the recent performance metrics are encouraging, Stifel analysts believe the current stock valuation adequately balances the potential risks and rewards, leading to the decision to maintain the Hold rating despite the increased price target. InvestingPro analysis reveals additional insights about MCW’s financial health, with 6 more exclusive ProTips and comprehensive valuation metrics available to subscribers through the detailed Pro Research Report, helping investors make more informed decisions about this car wash industry leader.

In other recent news, Mister Car Wash Inc. reported its fourth-quarter 2024 earnings, exceeding analysts’ expectations with an earnings per share (EPS) of $0.09, surpassing the forecasted $0.07. The company experienced a 9% increase in net revenues, reaching $251 million, bolstered by the launch of the Titanium membership service and the opening of 40 new locations, bringing the total to over 500 stores. The full-year revenue hit $1 billion, marking a 7% increase from the previous year, with adjusted EBITDA rising by 13% to $78 million for the quarter. Analysts noted the company’s strategic innovations and expansion efforts as key factors in its strong performance.

Mister Car Wash also announced the appointment of Carlos Chavez as its first Chief Technology Officer to enhance its focus on technology and digital innovations. Despite the positive earnings report, the company remains cautious about future consumer behavior, with expectations for net revenues between $1.038 billion and $1.064 billion in 2025. The company plans to add 30 to 35 new stores in key metro areas as part of its expansion strategy.

Additionally, the company anticipates adjusted EBITDA for 2025 to range from $334 million to $346 million, with adjusted net income per share forecasted at $0.43 to $0.45. Analysts from Guggenheim Securities and Mizuho (NYSE:MFG) have shown interest in the company’s pricing and marketing strategies, as well as its competitive positioning in the industry. Mister Car Wash’s management remains focused on disciplined growth and operational excellence to maintain its competitive edge.

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