NBEV - Expanding Market Opportunities Could Act As A Catalyst To Push PARTS ID Towards Profitability

Summary

• Parts ID has strong annual revenues but has struggled to post a profit since going public via SPAC.
• With cash waning down it will be a race against the clock to post a turn around.
• EV accessory sales & expansion beyond just traditional automotive parts could provide new revenue streams for the business' turn around.

New Market Opportunities Along With Easing Supply Chain Woes Could Push PARTS iD Stock Higher

PARTS iD, Inc. ( ID ) based out of Cranbury, NJ specializes in aftermarket automotive parts and accessories through a variety of platforms. The company has begun to expand their brand to include car, boat, motorcycle, camper, and recreational vehicle parts (Figure 1) and grew revenues well during the COVID-19 pandemic thanks to their strong online presence. The expansion even further into electric vehicle parts could provide an additional catalyst over the long term view and although supply chain woes have weighed on the business, analysts expect the company to be profitable by as soon as end of year 2024 if all goes well.

Figure 1. PARTS iD has expanded its brand beyond just car parts into an expansive array of aftermarket accessories

PARTS iD trades as if they are heading for bankruptcy with just a $45 million market cap despite posting around $400 million in annual revenues. With just above $7 million of cash on hand, the need for raising more capital is a strong possibility, or the speculative investor could imagine a buyout from a larger entity as the road to profitability appears to be there given time. If PARTS iD can turn the ship around and find profitability within the next year to year and a half the stock could offer as much as 2-5x long-term returns, but at the current state, it is a race against the clock.

Valuation

PARTS iD can be hard to value as the stock trades as if it is on the brink of bankruptcy. A good comparison is NewAge Inc ( NBEV ) who just a mere 3-4 months ago posted very similar financials and has now recently filed for chapter 11 bankruptcy . The stock had similar annual revenues, similar cash on hand, posted similar quarterly losses, but the major difference between the two being NewAge had a greater line of debt, and PARTS iD in our opinion has a greater product offering in a less cash-intensive business. This tells us at just a 0.11x price-to-sales ratio (Figure 2) PARTS iD has massive upside potential if they can quickly shift towards profitability or if they can draw in a big-name buyer/investor such as Amazon ( AMZN ) or eBay ( EBAY ) willing to infuse cash into the business and give ID the life they need to extend the time left on the clock.

Figure 2. PARTS iD trades much cheaper than peers which offer similar products

Risks

PARTS iD should not be but a small portion of one's overall portfolio. 1-2% or less portfolio allocation is recommended as there is a decent chance all of one's investment in the stock could be lost within the next 1 to 2 years. At the current cash burn rate PARTS iD will need to raise money, turn a profit, or draw in a buyout within 1-3 quarters to remain viable. If they can accomplish this investors could easily see 50-300% short-term returns, but if not the stock could potentially be a total loss. PARTS iD is a high-risk high-reward play in the online auto parts industry.

Conclusions

PARTS iD has a very nice user interface which that alone provides value to its customers that other larger names have not yet reached (Figure 3).

Figure 3. CarID allows for customers to easily find parts & accessories custom fit for their unique vehicle & application in a matter of minutes

The stock trades as if it is already going bankrupt, but we feel there is still value to be found in the business. With very little debt and strong revenues, we could very well see a larger name buying up or investing in the business to give the stock another breath of life to push through to profitability. It is a race against the clock though and therefore ID is a very high risk, high reward play and should be treated so with only small buys going forward on the hopes that the aforementioned catalysts will spark a turnaround.

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