On Friday, JPMorgan (NYSE:JPM) made a significant adjustment to its outlook on Mister Car Wash Inc. (NYSE:MCW), shifting the stock's rating from Neutral to Overweight. The firm also set a new price target of $8.50 for the company's shares.
The upgrade comes as JPMorgan sees auto services companies as important benchmarks for performance, similar in market stability to restaurants. Mister Car Wash, with its valuation at 11 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) based on 2024 estimates, aligns closely with industry comparables.
The analyst at JPMorgan highlighted that other companies in the sector, such as VVV and BYD (SZ:002594) CN, are expected to experience low-to-mid-teens growth in top-line revenue and EBITDA. In contrast, Mister Car Wash is projected to see mid-single-digit (MSD) growth in both areas.
The firm also noted that another company, DRVN, is currently navigating through challenges including two ongoing turnarounds, the recent departure of its CFO, and limited visibility on achieving its multi-year targets. This has led to investor skepticism.
JPMorgan's new price target for Mister Car Wash is based on an approximate 9 times EV/EBITDA ratio on the firm's 2024 estimates. This valuation is consistent with current market valuations and equates to roughly 13 times the price-to-earnings (P/E) ratio. The updated target implies a positive outlook for Mister Car Wash's financial performance in the coming year.
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