Analyst Note| Dawit Woldemariam |
After taking a fresh look at our thesis on LKQ, we’re maintaining our $38 fair value estimate. Vehicle miles driven dropped significantly during the COVID-19 pandemic and have since started to recover. We expect vehicle miles driven to return to 2019 levels in the near term. The number of auto claims is another major driver for alternative parts demand, which we expect will increase as more vehicles return to roadways, benefiting LKQ’s collision parts business. We think the company’s mechanical parts will also see an uplift as the average age of vehicles remains elevated.