On Friday, JPMorgan (NYSE:JPM) adjusted its stance on Driven Brands (NASDAQ:DRVN), downgrading the stock from Overweight to Neutral and reducing the price target to $12.50 from the previous $18.00. The firm's analysis indicates that Driven Brands is facing challenges that could impact its financial performance and investor confidence.
The firm compared Driven Brands to other companies in the auto services sector, noting that while some peers are expected to see low-to-mid-teens growth in top-line and EBITDA, Driven Brands is only projected to achieve mid-single-digit (MSD) growth in these areas. This comparison was used to justify the revised price target and rating.
The analysis further highlighted the issues Driven Brands is dealing with, including two ongoing turnarounds. The recent departure of the company's CFO and the lack of clear visibility on achieving multi-year targets have contributed to investor skepticism, according to the firm.
The new price target of $12.50, set for December 2024, is based on approximately 9 times enterprise value to EBITDA (EV/EBITDA) on the firm's 2024 estimates. This valuation is consistent with the current market valuations and translates to about 13 times the price-to-earnings (P/E) ratio. JPMorgan's assessment reflects a cautious outlook on the stock's potential performance in the near future.
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