Tuesday - Stephens initiated coverage on Mister Car Wash Inc. (NASDAQ:NYSE:MCW) with an Equal Weight rating and a price target of $8.00. The firm's analysis reflects a cautious stance due to recent performance trends and future expectations. Mister Car Wash has experienced a 7% drop in revenue per store since the first quarter of 2022, which has been attributed to a pressured consumer base.
In response to the decline in retail volumes, Mister Car Wash introduced new offerings, such as the Titanium wash, and raised the price of its Platinum wash. These initiatives are part of the company's strategy to mitigate the impact of lower retail traffic. Despite these efforts, the company's management is planning to increase advertising spend in 2025 to boost retail traffic further.
The conversion rates for Mister Car Wash's Unlimited Wash Club (UWC) memberships are currently around 10%. This figure is seen as a positive indicator for the growth of the company's membership base. Stephens anticipates that this will provide some support to Mister Car Wash's financials.
For 2025, Stephens projects that Mister Car Wash will achieve 1.5% growth in comparable store sales and 4.4% growth in EBITDA. These figures fall short of the street's more optimistic estimates of 3.3% and 8.9% growth, respectively. The company's ability to navigate the current economic environment has been noted, but the firm suggests that a resurgence of retail customers is necessary before it can adopt a more positive outlook on the stock.
The price target set by Stephens is based on an 11 times multiple of the firm's next twelve months (NTM) EBITDA estimate for Mister Car Wash. This valuation reflects the balance between the company's proactive measures to address current challenges and the analyst's need for more evidence of a sustained recovery in retail customer traffic.
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