gilaxia
The car has become an article of dress without which we feel uncertain, unclad, and incomplete in the urban compound. ― Marshall McLuhan
Today, we put CarParts.com, Inc. (NASDAQ:PRTS) in the spotlight for the first time. The company and its stock got a big boost during Covid and the associated lock downs, as did most online firms. Sales growth was between 60% to 90% on a year-over-year basis during the 2nd, 3rd and 4th quarters of FY2020 for CarParts. However, that tailwind has completely dissipated, and the stock has continued to struggle over the past few years. Will 2024 be the year fortunes start to brighten for CarParts? An analysis follows below.
Seeking Alpha
Company Overview:
This internet retailer is headquartered just outside of Los Angeles in Torrance, CA. The company operates as an online provider of aftermarket auto parts and accessories. These include replacement parts that consist of part for the exterior of an automobile; mirror products; engine and chassis components, as well as other mechanical and electrical parts; and performance parts and accessories to individual consumer. These can be purchased from its network of e-commerce websites and online marketplaces. CarParts also sells its products to auto body and repair facilities. The stock trades just south of three bucks a share and sport an approximate market capitalization of $160 million.
Third Quarter Results:
The company posted its Q3 numbers on October 30th. The company delivered a GAAP net loss of four cents a share, a penny a share above expectations. However, revenues only grew bit over one percent on a year-over-year basis to $166.9 million. This was some $5 million below consensus estimates.
The company had a net loss of $2.5 million for a quarter, an increase from the $900,000 loss in 3Q2022. Adjusted EBITDA also fell to $3 million from $6.3 million in the same period a year ago. Gross margins fell 120 bps to 32.9%. The decline in margins was attributed to higher outbound transportation costs and a shift in product mix. The company did launch a mobile app during the quarter, which drove some $2 million worth of sales in Q3.
Analyst Commentary & Balance Sheet:
Since third quarter results were posted, five analyst firms including RBC Capital and Lake Street have reissued Buy/Outperform ratings on the stock. Price targets proffered range from $4 to $8 a share.
Approximately two percent of the outstanding float in the shares are currently held short. The last insider transaction in the stock was in early August when the company’s COO added nearly $11,000 worth of equity to his holdings. After posting a net loss of $2.5 million, the company had cash and marketable securities of just over $66 million. CarParts carries no long-term debt. Management repurchased $1.1 million of its own shares in the third quarter.
Verdict:
The company lost two cents a share in FY2022 on just over $661 million in sales. The current analyst firm consensus has the firm losing 14 cents a share in FY2023 even as revenues increase slightly to just north of $673 million. The project similar losses in FY2024 on four percent sales growth.
One could make the case that the stock could be undervalued on a price to sales basis (priced at just 25% of annual sales) especially when considering the net cash on the company’s balance sheet (15% of annual sales). However, CarParts is seeing slow/negligible sales growth. It also is currently unprofitable and is likely to remain so at least on the medium-term horizon. Therefore, it is hard to find the stock attractive at current trading levels and that is likely to remain the case until management can guide the company back into the black.
Our cars are turning into smartphones with wheels. ― Mokokoma Mokhonoana
