UPDATE: Bank of America Upgrades KAR Auction Services Following Onset of Meaningful Recovery

In a report published Monday, Bank of America analyst John Lovallo II upgraded KAR Auction Services KAR from Underperform to Buy, and raised the price target from $23.00 to $30.00.

In the report, Bank of America noted, “Due to what appears to be the onset of a meaningful recovery in wholecar auction volume at ADESA, we are raising our estimates, PO, and rating on KAR from Underperform to Buy. Specifically, we are raising our 2014e EBITDA from $565mm to $600mm, 2015e from $602mm to $644mm, and our PO on KAR shares from $23 to $30, based on a 2014e EV/EBITDA multiple of approximately 9X. We note that we had previously valued KAR at 8X EV/EBITDA, which represented a meaningful discount to other aftermarket companies with less exposure to the downturn in wholecar volume. As a result of the early signs of recovery, we believe 9X our 2014e is warranted.”

KAR Auction Services closed on Friday at $26.28.