Carparts.com (NASDAQ: PRTS) is an e-commerce business with operations focused on the auto aftermarket. Some investors might recognize PRTS’ prior name of U.S. Auto Parts Network. PRTS’s offerings include automobile parts and accessories added as replacements following collisions and also those designed to boost vehicle performance.
The Transformation
The arrival of new management has helped PRTS transform itself through investments in tech and advertising. The company continues to open new distribution centers to meet demand. The consolidation of PRTS’ web brands under the umbrella of the Carparts.com website has helped the company pivot toward more of a unified branding.
PRTS sales have soared during the ongoing COVID-19 pandemic, catalyzing auto parts and e-commerce sales alike. The fact that the economy is contracting and cash-conscious consumers are electing to repair their current vehicles instead of buying new ones certainly bodes well for PRTS. Many of these customers will prove loyal to the PRTS brand long after the pandemic ends, continuing to drive PRTS growth.
The Auto Parts Industry Disruptor has Arrived
It was not long ago when automobile owners and automobile repair businesses had few options for the purchase of replacement parts. The limited options minimized supply even though demand increased as the number of automobile owners continued to grow as time progressed.
Enter PRTS. PRTS makes it easy to buy whatever auto part is necessary for vehicle repair or modification for improved performance. In short, PRTS is a legitimate disruptor in its space, shaking up an industry that was long overdue for a change.
The Analysts’ Take on Carparts.com
The top analysts have established an average price target of $26.50 for PRTS, indicating the stock is underpriced at its current level of $15.48. If PRTS hits the analysts’ expected price, it will have popped by nearly 72%. Six analysts cover the stock, with each carrying a “buy” rating, as of this article. This is quite the rosy outlook, to say the least.
Out With the Old in With the New
PRTS is not the same stock as it was in the mid-aughts. The new leadership has helped narrow the company’s focus on e-commerce. PRTS’ unprofitable business lines have been eliminated. New CEO Lev Peker has replaced underperforming executives, modernized the company’s technology, and enhanced its management of inventory data through data science.
PRTS now has several new distribution centers, more competitive pricing, and faster part delivery. The changes appear to be working as PRTS’ customer retention is high. Around one-third of all PRTS business is from repeat customers. Furthermore, PRTS is capable of providing services that are unavailable at regular brick-and-mortar auto parts stores such as saving automobile profiles, ultimately boosting customer retention all the more.
Carparts.com by the Numbers
The changes outlined above are working quite well for PRTS as the company reported record net revenues of $119.70 million during the fourth quarter 2020. This represents an increase of 90% on a year-over-year basis. Furthermore, Carparts.com reported fiscal 2020 net revenues of $443.9 million, which represents a year-over-year increase of 58%. A large part of PRTS’ success is attributable to management’s decision to focus on selling parts on the internet and shutting down its unprofitable segments. Though some of this growth is attributable to the pandemic, most people revert to e-commerce shopping after a successful initial experience, a fact that certainly favors PRTS.
A Work in Progress
PRTS has not yet perfected its business model, as it is in the process of doing so. PRTS is currently filling its Grand Prairie, Texas distribution center, a space recently opened to meet the ever-increasing demand. Once PRTS has all of its distribution centers up and running and has fully updated its internal software, it will have a chance to reach its true potential.
Keep in mind, PRTS’ influx of changes and willingness to pivot without delay have rushed nearly two decades’ worth of capital expenditures into a mere three years. If everything goes as planned, PRTS customers will be able to order parts to their homes and even have a mechanic arrive at their chosen location to perform whatever automotive work is necessary. However, PRTS customers will still be empowered to have their local mechanic install their chosen parts at a nearby garage.
Potentially Worthy of Your Investing Dollars
In the end, PRTS will greatly improve customer convenience, providing affordable automotive parts promptly at the lowest possible price. This is precisely why PRTS is a legitimate disruptor worthy of a position in your portfolio. Overlook the fact that PRTS revenue growth might slow 10% this year. Scoop up this budding disruptor with an eye on growth across posterity, hold it for the long haul.
Disclosure: Neither Matt Rego nor Spotlight Growth have any position or relationship with any companies mentioned in this article. No payment was made to create this article. This article should not be taken as a solicitation or recommendation to buy or sell any securities. Please conduct your own research and consult your financial advisor to determine your risk tolerance and investment path. We are not licensed brokers or investment advisors.
