As a publicly traded company, Mister Car Wash (MCW) – the nation’s largest car wash brand according to one of its press releases – cuts an awfully odd figure in the market today. With so much attention paid on burgeoning innovations such as cloud computing and artificial intelligence, betting on something like MCW stock seems rather anachronistic. To be fair, the critics have a point.
Since the beginning of this year, MCW stock gave up more than 10% of equity value. And recent financial performances haven’t exactly inspired robust confidence. As well, the car wash industry might seem irrelevant to casual observers. Fundamentally, with so many people still working from home, the white-collar consumer base has plenty of time, cutting into the convenience narrative undergirding Mister Car Wash.
However, a deeper examination reveals a potential opportunity for MCW stock for patient investors. To clarify, it’s not for the faint of heart. Still, with options traders apparently identifying shares as a possible contrarian prospect, Mister Car Wash might be an enticing idea for the bold.
MCW Stock Has Its Detractors
Before diving into the bullish narrative of MCW stock, it’s important to acknowledge the obvious: Mister Car Wash has its detractors.
On the charts, the red ink didn’t just materialize from the January opener. In the trailing 365 days, MCW stock fell 26%. Since making its public market debut in June 2021, shares gave up nearly 59%. Not surprisingly, heavy pressures impacting the consumer economy – perhaps most notably stubbornly high inflation – may have contributed to the underlying company’s poor results.
Making matters worse, recent data don’t provide the lay observer much hope for optimism. Earlier this month, Zacks pointed out that Mister Car Wash posted adjusted earnings per share of 8 cents for its first quarter of 2023 disclosure. However, this figure missed Wall Street’s consensus estimate of 9 cents per share. Further, the result compared unfavorably to the year-ago quarter’s EPS of 11 cents.
On the top line, Mister Car Wash posted revenue of $225.96 million, which missed the Street’s target by a sizable 2.44%. The one bright spot was that one year ago, the company rang up $219.42 million in sales. Given that the economy could face even more challenges ahead, the situation appears pessimistic for MCW stock.
Some Light Appears at the End of the Tunnel
Nevertheless, some evidence materialized that suggests Mister Car Wash could be due for a recovery. First, MCW stock represented one of the highlights of Barchart’s screener for unusual stock options volume.
Specifically, total volume following the May 22 session reached 3,420 contracts against an open interest reading of 4,791. Interestingly, the delta between the Monday session volume and the trailing one-month average metric came out to 702.82%. What’s more, call options represented 100% of the day’s volume.
On a broader level, the U.S. car wash services market may be poised for revenue expansion. In 2021, the sector reached a valuation of $14.67 billion, according to Grand View Research. However, analysts there project that the segment will expand at a compound annual growth rate (CAGR) of 5.5% from 2022 to 2030. At the culmination of the forecasted period, sector revenue may hit $23.78 billion.
To no one’s shock, the COVID-19 crisis initially sparked a catastrophic sales impact on the car wash industry. As a means to counter the severe downside, many operators started offering value-added services to stay ahead of the competition.
However, with social normalization trends gradually rising – which should entail more companies recalling their employees – the tradeoff involving cash for time savings should become more appealing for customers. Therefore, MCW stock may be a downwind beneficiary.
Also, Grand View Research points out that “[d]ue to strict environmental standards that prohibit household car washing methods, the need for professional car cleaning service is expected to rise. As purchasing power of consumer increases, their attention towards regular vehicle maintenance will keep growing.”
Thus, for the patient investor, MCW stock could be intriguing.
A ‘Snoozer’ of an Investment
To be clear, Mister Car Wash won’t appeal to everyone. Primarily, the Barchart Technical Opinion indicator rates MCW stock as an 80% sell. Also, Wall Street analysts peg shares as a consensus hold, which isn’t exactly the most affirming of assessments.
That said, MCW stock might turn out to be a snoozer of an investment. More than likely, shares will take a while to recover from its long-term losses. However, if you’re entering the space now, MCW could be enticing. Fundamentally, a few dynamics are pointing in the right direction, an attractive proposition for speculators who are willing to wait for the bullish thesis to blossom.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
