Q: Does BYD represent a good entry point here? Can you help me consider this investment thesis.
El Nino Year as a Tailwind: El Nino’s warmer weather created short-term challenges for Boyd in 2024, its effect might be temporary. If weather patterns stabilize, the demand for collision repairs could return to normal levels, providing a more favorable environment for achieving growth targets.
Interest Rates as a Tailwind: High interest rates making new car purchases less attractive is indeed a potential tailwind. If consumers opt to repair rather than replace their vehicles due to economic conditions, Boyd stands to benefit. This trend supports the long-term demand for Boyd’s services.
Boyd has a stated goal to double the size of the business based on 2019 sales by 2025. Considering Boyd’s historical performance, strategic initiatives, and the potential tailwinds from economic conditions, is it still reasonable to be optimistic about Boyd’s ability to double its business by 2025.
El Nino Year as a Tailwind: El Nino’s warmer weather created short-term challenges for Boyd in 2024, its effect might be temporary. If weather patterns stabilize, the demand for collision repairs could return to normal levels, providing a more favorable environment for achieving growth targets.
Interest Rates as a Tailwind: High interest rates making new car purchases less attractive is indeed a potential tailwind. If consumers opt to repair rather than replace their vehicles due to economic conditions, Boyd stands to benefit. This trend supports the long-term demand for Boyd’s services.
Boyd has a stated goal to double the size of the business based on 2019 sales by 2025. Considering Boyd’s historical performance, strategic initiatives, and the potential tailwinds from economic conditions, is it still reasonable to be optimistic about Boyd’s ability to double its business by 2025.
5i Research Answer:
We think the tailwinds make sense and BYD has certainly proved its acumen for more than 20 years. We do not like 'counting' on the weather to change, of course, and there is a (small) offset in that EVs and self-driving vehicles may results in fewer collisions, longer term. But the company's recent issues should be easily fixed. Essentially, business was so good last year it had a cost structure in place that resulted in weakness when business slowed down sharply due to various factors. But the cost structure can be adjusted, and the issues impacting demand should change over time. We think it is attractive here for buyers to accumulate (no rush, but we think it will be higher in 12 to 18 months).