Angus Mordant/Bloomberg
Three consumer-oriented companies that went public not long ago have seen their share prices trail off. Baird argues that they deserve another look.
Analyst
Peter Benedict
makes the case for pool supplier Leslie’s (LESL), which started trading in October; automotive services firm Driven Brands (DRVN), which debuted in January; and animal-care firm Petco Health & Wellness (WOOF), which went public at the start of the year. All are down on average nearly 30% from their post-IPO highs.
Benedict reiterated Outperform ratings on the stocks, with price targets of $17 for Leslie’s, $22 for Driven Brands, and $18 for Petco.
“With fundamentals intact and the bias to near-term numbers likely higher, we believe the overall correction has presented investors with an opportunity to give these out-of-favor IPO stocks a second look,” he writes.
For Leslie’s, Benedict argues that average analyst estimates for comparable sales estimates look “way too low,” and that recent momentum means there could be even more upside to his above-consensus figures. Beyond that, he believes the company will benefit from increased omnichannel capabilities, enhanced loyalty initiatives, and rising chlorine prices.
The analyst believes that Driven Brands “seems to be flying under most investors’ radar,” even as he sees the company taking market share from rivals and benefiting from an economic reopening. He calls the valuation compelling and writes that the shares “hold considerable fundamental appeal,” with potential upside to first-quarter estimates.
Benedict expects strong first-quarter, same-store sales for Petco. The company faces difficult year-over-year comparisons ahead, but Benedict writes that the company’s omnichannel platform and “integrated pet care ecosystem position the company to capitalize on the elevated level of sector demand that lies ahead.” The company is rolling out more veterinary hospitals, and offers investors access to a defensive growth sector with a reasonable valuation, he argues.
Write to Teresa Rivas at teresa.rivas@barrons.com
