Bapcor Ltd (ASX: BAP) shares have hit a 12-month low following a trading update this week which said the company's performance had been "below expectations''.
But Macquarie analysts believe there is still money to be made buying Bapcor shares at these levels, with their 12-month price target on the stock indicating a total return of almost 15%.
Image source: Rivian Automotive
Tough start to the year
Bapcor said on Tuesday that its trading performance in October and November was "below expectation mainly in the trade segment''.
The company went on to say:
Revenue declined in tools and equipment versus the prior corresponding periods though parts revenue has grown modestly. Trade is also investing in pricing across specific parts categories to regain market share. The price reductions have adversely impacted margins in the short term but are expected to drive volume growth in the future.
Bapcor updated its guidance for the first half to be a loss in the range of $5 million to $8 million, including about $13 million in non-recurring items.
The company also updated its full-year guidance, saying net profit was expected to be in the range of $31 million to $36 million, and excluding the non-recurring ietms from the first half, would be in the range of $44 million to $49 million.
Bapcor delivered a full-year net profit of $28.1 million for FY25, which was up 117% on the previous year due to lower significant items.
Working on a turnaround
The company's Chief Executive Angus McKay said on Tuesday the weaker operational result for October and November was disappointing.
Although the turnaround of the business is more challenging and taking longer than expected we are committed to doing the difficult work that will result in a stronger, more sustainable company. I am excited by the appointment of Craig Magill and Dean Austin to Key EGM roles in the trade and retail segments respectively. Craig has significant Bapcor and automotive experience and Dean brings extensive retailing and merchandising experience.
Shares still good value
Macquarie said in a research note sent to clients this week that the downgrade was a 17% reduction from previous expectations, and it has a neutral rating on Bapcor shares.
That said, Macquarie still has a 12-month price target of $2.05 on the shares, and once dividends are factored in, was forecasting a total shareholder return of 14.7% for Bapcor shares.
The updated price target was a steep 29% discount to Macquarie's previous price target on the shares however.
The research note also said:
Delivering revised FY26 guidance is critical to provide confidence in the underlying earnings base and alleviate any balance sheet concerns, stabilisation of revenue, earnings and market share in the trade segment.
Bapcor shares hit a 12-month low of $1.80 on Wednesday before recovering slightly to be 1.2% lower at $1.82.
Bacpor was valued at $627.9 million at the close of trade on Tuesday.
