CarParts.com is absolutely surging this year and nobody is talking about it.
And CEO Lev Peker tells TheStreet the company views itself as the e-commerce leader of auto parts. This comes as FAANG stocks have been under pressure the past month-and-a-half on valuation concerns. The Nasdaq 100, full of large, dominant and cash flow-generative growth tech stocks, is still down about 1% since September 2.
The company, with a market cap north of $570 million, has seen its stock rise more than 500% this year. The company delivers parts directly to the customer, who is focused on at-home projects this year because of the pandemic.
That's a perfect storm for CarParts, which is seeing strong sales growth this year and likely into the next several years (2021 expected revenue is $430 million). Sure, people have already acquired new parts this year, but Peker notes that there is a broader parts replacement cycle underway for those who have old cars and have not bought new ones of late.
And who else is better positioned to capture market share during the at-home environment than the one player in the business that is entirely focused on delivering parts through e-commerce? Competitors O'Reilly Auto Parts (ORLY) - Get O'Reilly Automotive, Inc. Report is up just under 7% this year. AutoZone (AZO) - Get AutoZone, Inc. Report is up less than 1%.
When asked if CarParts is the Amazon of auto parts, Peker said "absolutely."
Another advantage to being an online player: "Because there are so many different variations of vehicles on the road, it's very difficult for a small box [brick-and-mortar] to carry the entire assortment," Peker said. "Online allows an endless aisle experience where you can get the parts that you need for your car, so that's where we come in."
The stock only trades at about 1.5 times 2021 sales, but it trades at almost 250 times expected earnings per share. Although top-line growth is expected to be stellar -- in the mid teens in percentage terms -- Peker said he expects to drastically increase the operating margin from 1% to 6% over time. That's because the company, now, is aggressively acquiring new customers, but will ratchet down its marketing spend when it turns its focus to customer retention.
CarParts will be plenty competitive. The counterargument against this stock is likely more about valuation.