On Dec 4, 2015, shares of Pep Boys – Manny, Moe & Jack PBY reached a 52-week high of $15.74, before eventually closing at $15.69. The closing price represents a year-to-date return of 37.5%.
Share Price Drivers
Activist investor Carl Icahn has purchased 12.1% stake in Pep Boys. The investor undertook this investment strategy as he considers that the company will benefit from acquisition opportunities. This pulled up investors' sentiment and the share price of the company to the 52-week high due to Icahn's trust and huge investment in the company.
The company’s fundamentals are also strong. Pep Boys is poised to benefit as the industry continues to show stability, with the increasing average age of vehicles and a rise in the number of miles driven. The average age of cars on the U.S. roads is rising (more than 11 years currently). This is driving the demand for auto parts.
In addition, the combination of a steadily improving job market and low gasoline prices is positively impacting the company’s results. Moreover, growing vehicle complexity and customer preference for DIFM are anticipated to lead to consistent demand for maintenance and repair services.
Pep Boys’ strategic plan, Road Ahead, will help in business expansion. Per this strategy, the company will remodel and undertake store growth programs in order to enhance sales and margins as well as return on invested capital. This will boost the company’s earnings and cash flow.
Currently, the company carries a Zacks Rank #3 (Hold).
Better-ranked automobile stocks include General Motors Co. GM, Fox Factory Holding Corp FOXF and O'Reilly Automotive Inc. ORLY. All these stocks carry a Zacks Rank #2 (Buy).
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