DRVN: Narrowed 2025 Guidance Will Support Future Upside Repricing

Analysts have trimmed their blended price target for Driven Brands Holdings by about US$0.23 per share to just under US$21. This reflects slightly lower assumed revenue growth, a modestly lower P/E multiple, and updated peer valuation comparisons following recent research updates that cited tighter FY25 guidance and softer comparable company valuations.

Analyst Commentary

Recent Street research on Driven Brands Holdings highlights a mix of optimism about execution and growth, alongside caution around valuation and guidance.

Bullish Takeaways

Bullish analysts point to Q3 results that were slightly ahead of Street expectations as a sign that the company is executing against near term operational goals, even as assumptions are refined.
Some bullish analysts have made substantial upward adjustments to their price targets, which signals confidence that the business model and earnings power can support higher valuation levels over time.
Despite trimming individual price targets, bullish analysts continue to see room for upside relative to current assumptions, tying their views to the company’s ability to sustain revenue growth and manage costs.
Supportive ratings alongside adjusted targets indicate that bullish analysts see recent guidance updates as a recalibration rather than a shift in the underlying long term thesis.

Bearish Takeaways

Bearish analysts are trimming price targets in response to narrower FY25 guidance, which they view as reducing visibility on growth and limiting potential valuation expansion.
Lower comparable company valuations are a key factor in the reduced targets, as peers are now being used to justify more conservative multiples for Driven Brands.
The modest reduction in assumed revenue growth and a slightly lower P/E multiple reflect concern that prior expectations may have been too generous relative to updated guidance and market conditions.
Target cuts of several dollars per share or more send a clear signal that some bearish analysts see a less favorable risk reward trade off if execution or market sentiment weakens further.

What's in the News

The company updated its earnings guidance for the fiscal year ending December 27, 2025, to reflect the reclassification of the international car wash business as discontinued operations and now expects revenue of US$1.85b to US$1.87b (company guidance).
In a separate guidance update for the same fiscal year, the company indicated expected revenue in the range of close to US$2.10b to US$2.12b, with same store sales growth guided to the low end of the original 1% to 3% range and net store growth of approximately 175 to 200 locations (company guidance).
The two guidance updates both reference fiscal 2025 but use different revenue ranges, which may reflect timing differences or classification changes linked to discontinued operations and could be important context for interpreting analyst price target revisions (company guidance).

Valuation Changes

Fair Value: Trimmed slightly from about US$21.15 to about US$20.92 per share, reflecting modestly updated assumptions.
Discount Rate: Adjusted marginally lower from roughly 9.08% to about 8.99%, indicating a small change in required return assumptions.
Revenue Growth: Shifted from an assumed 0.25% decline to an assumed 2.23% decline, pointing to more cautious expectations for top line trends in the model.
Net Profit Margin: Raised from roughly 18.01% to about 21.02%, suggesting the updated model assumes better profitability relative to earlier estimates.
Future P/E: Reduced from about 10.45x to about 9.38x, implying a lower valuation multiple applied to expected earnings.

Expansion of higher-margin, non-oil services and digital integration is driving greater profitability and enhanced customer retention.
Strong recurring demand, store growth, and financial flexibility are expected to support sustained revenue and margin expansion.
Driven Brands faces mounting risks from EV adoption, declining franchise sales, market saturation, labor costs, and intensifying competition from automakers' direct service initiatives.

Catalysts

About Driven Brands Holdings

Provides automotive services to retail and commercial customers in the United States, Canada, and internationally.What are the underlying business or industry changes driving this perspective?

Continued growth in the average age of vehicles and post-pandemic increases in miles driven are boosting recurring demand for aftermarket maintenance, which is translating into robust same-store sales growth and a strong pipeline for new store openings-supporting long-term, compounding revenue growth.
Driven Brands is rapidly expanding its network of Take 5 locations (with a 150+ annual unit addition target) and increasing the proportion of stores offering new, higher-margin non-oil-change services, such as differential fluid replacement; this is expected to drive higher average revenue per customer and support gross margin expansion.
Rising consumer preference for convenience and one-stop, multi-service auto care is fueling high attachment rates for ancillary (non-oil) services at Take 5, which now contribute over 20% of segment sales and have significant runway for further penetration-positively impacting net margins and customer lifetime value.
The company is capitalizing on its scale and operational leverage by integrating digital platforms and data analytics to enhance customer retention, increase predictive maintenance offers, and optimize store-level economics, likely driving improvements in both net margins and earnings predictability over time.
Strategic deleveraging following asset sales and strong free cash flow generation from franchise and international operations is enhancing financial flexibility, supporting future growth investments and potentially reducing interest expense, thereby positively impacting net income and EPS.

Driven Brands Holdings Earnings and Revenue Growth

Driven Brands Holdings Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Driven Brands Holdings's revenue will grow by 2.8% annually over the next 3 years.
Analysts assume that profit margins will increase from -12.7% today to 9.6% in 3 years time.
Analysts expect earnings to reach $250.1 million (and earnings per share of $1.52) by about September 2028, up from $-306.6 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.3x on those 2028 earnings, up from -10.2x today. This future PE is lower than the current PE for the US Commercial Services industry at 26.9x.
Analysts expect the number of shares outstanding to grow by 0.1% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.46%, as per the Simply Wall St company report.

Driven Brands Holdings Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Increasing adoption of electric vehicles (EVs) poses a significant long-term risk, as Driven Brands' core services (such as oil changes) become less relevant-potentially reducing future revenue streams as EV penetration accelerates.
The company's Franchise Brands segment is experiencing ongoing same-store sales declines, with no near-term resolution in sight and continued headwinds for collision and discretionary services like Maaco, which could weigh on system-wide revenues and net margins if trends persist.
Overreliance on growth from the Take 5 Oil Change business and aggressive unit expansion exposes Driven Brands to slower incremental returns, higher new store opening expenses, and possible declines in same-store sales growth as market saturation approaches, putting pressure on EBITDA growth.
Labor shortages and rising wages, particularly for certified trades in the collision and maintenance segments, may increase operating costs for franchisees and company locations, risking compression of operating margins and reduced profitability.
The fragmented nature of the automotive aftermarket, coupled with potential for OEMs to expand direct-to-consumer service offerings using connected car technology, could erode Driven Brands' competitive advantages and customer base over time, hurting revenue and long-term earnings visibility.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $21.923 for Driven Brands Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $25.0, and the most bearish reporting a price target of just $18.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.6 billion, earnings will come to $250.1 million, and it would be trading on a PE ratio of 18.3x, assuming you use a discount rate of 8.5%.
Given the current share price of $19.08, the analyst price target of $21.92 is 13.0% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Aging Vehicles And Digital Integration Will Expand Future Potential