How to Buy Mister Car Wash (MCW) Stock

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Contributor, Benzinga
February 7, 2022
$8.03
0.32[4.15%]
Last update: 4:00PM (Delayed 15-Minutes)
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Open7.820Close8.030
Vol / Avg.1.213M / 1.418MMkt Cap2.533B
Day Range7.770 - 8.21052 Wk Range4.800 - 10.070

If Mister Car Wash, the nation’s largest car wash brand, had attempted to launch its initial public offering (IPO) exactly 1 year ago, you would be forgiven for your skepticism. According to the Bureau of Transportation Statistics (BTS), nearly 77 million people stayed home on average for the week ending June 27, 2020. During the same period in 2019, only 63 million decided to stay in.

But thanks to the COVID-19 lockdown lifts and state governments loosening their risk-mitigation protocols, more people are out and about. You simply couldn’t ask for better circumstances for the underlying business.

When Did Mister Car Wash IPO?

Mister Car Wash IPO’d on June 28, 2021 at a price of $15 per share, raising $468 million during the initial offering. When trading opened the next day, the firm’s market cap exceeded $6.2 billion

Mister Car Wash Financial History

Commanding a massive share of the car wash industry, you may rightfully consider Mister Car Wash as an economic bellwether. As the labor market gains traction and with companies recalling their employees back to their cubicles, the level of automotive traffic should increase significantly from their pandemic lows. The BTS reports that for trips between 1 and 25 miles for the week ending approximately mid-June, traffic is within 86% of pre-pandemic norms.

In 2020, this metric was only 70% of normal, demonstrating a significant shift in auto traffic patterns. Further, Mister Car Wash has 344 locations in 21 states, giving the company substantial coverage capacity. Additionally, it benefits from strong customer loyalty, with 1.4 million people taking advantage of the unlimited wash membership. This club tally represents 62% of sales, while it’s reported that same-store sales growth averaged 7% over the last 11 years.

Keep this broader context in mind as you review the financial performance for Mister Car Wash. In fiscal year 2020 (ended December 31), it generated net revenue of $574.9 million, which is down nearly 9% from the $629.5 million posted in fiscal 2019. Ordinarily, an almost double-digit loss on a year-over-year basis doesn’t exactly evoke confidence. But because of the pandemic and subsequent lockdowns, very few people hit the road.

More than likely, this will change in favor of MCW stock. One of the catalysts for the upcoming IPO is “retail revenge” — the idea that people who would have spent money in 2020 but whom COVID-19 denied will hit the retail market in full force. This dynamic bodes well for Mister Car Wash as it implies a robust leap in traffic volume.

Under the terms of the market debut, the IPO will feature the selling of 37.5 million shares, with Mister Car Wash distributing 31.25 million shares, while certain shareholders will sell 6.25 million. According to estimates, the MCW IPO will price between $15 and $17 per share. At the top end of the range, the offering will raise $637.5 million and command a valuation of over $5 billion.

Following the proceedings, Mister Car Wash’s management team expects to have slightly over 296 million shares outstanding. Additionally, Bank of America (NYSE: BAC), Morgan Stanley (NYSE: MS), Goldman Sachs (NYSE: GS) and Jefferies Financial Group (NYSE: JEF) act as the lead underwriters.

In total, the U.S. car wash industry enjoys a market value of $11 billion. Within this sector, the automated car wash subsegment — the one that Mister Car Wash specializes in — is worth approximately $7.7 billion (or 70% of the total). Therefore, investors have high hopes that MCW stock will jump higher on the open as consumer sentiment gradually improves post-COVID.

Mister Car Wash Potential

As mentioned before, Mister Car Wash acts as an economic bellwether because it’s a downwind indicator for consumer sentiment. For instance, according to the 2015 American Housing Survey, “63% of all occupied housing units have a garage or carport.” But that means more than one-third of U.S. residents do not have such access and may require car-washing services. If the economy is booming, you would reasonably expect consumers to advantage premium services, such as Mister Car Wash.

American consumer behaviors decades in the making resulted in a gravitation toward big vehicles, particularly SUVs. Interestingly, the rising threat of climate change has done little to stem consumer addiction toward these models. While the planet might not benefit from SUV sales, Mister Car Wash could — a resurgent consumer class will probably view car-washing services for these larger vehicles and the ease of memberships as worthy expenditures.

But one of the newer and longer-term trends bolstering the case for MCW stock is the gig economy. Already burgeoning prior to the pandemic, millennials enjoyed the independent lifestyle that gig work facilitated. But during the COVID-related lockdowns, millions of white-collar employees got a taste of the gig life — and many understandably want more telecommuting opportunities. However, companies are unlikely to universally grant this wish, suggesting an increase in independent contractors. And time is money for gig workers; the efficiency of Mister Car Wash could become a beneficiary.

Finally, the company itself has myriad attributes that make MCW stock relevant to a new generation of investors. Mainly, Mister Car Wash uses freshwater recycling and reduction systems to help prevent water waste. Also, the business integrates environmentally friendly chemistry, ensuring that water from its facilities do not harm local wastewater infrastructure.

How to Buy Mister Car Wash (MCW) Stock

If you know how to buy stocks, you can jump right in. If not, follow the simple steps below.

Step 1: Pick a brokerage.

Prior to the advent of the internet, the choice of brokerage carried much consequence due to varying service levels and prices. More recently, mobile trading apps entered the scene, creating intense competition for clients. For you, the benefit is that the brokerage industry standardized financial incentives, such as commission-free trading. Thus, you are free to choose based on your lifestyle and preferences.

Below is a list of best brokers to consider.

Step 2: Decide how many shares you want.

Your share count is pivotal as it determines your risk-reward profile. The more equity you have in a particular company, the more you will be profitable when the underlying stock rises in value. Of course, the opposite is also true. Therefore, save your high-share counts for only your strongest-conviction ideas.

Step 3: Choose your order type.

Make sure to understand the below concepts before placing your first trade:

  • Bid: The bid is the top price a buyer will extend. It is always lower than the ask.
  • Ask: The ask is the lowest price that a seller will accept. It is always higher than the bid.
  • Spread: The difference between the bid and ask, the spread also indicates market liquidity and risk. Tighter spreads imply higher liquidity and lower risk due to buyer availability. On the other hand, broader spreads indicate lower liquidity and higher risk.
  • Limit order: Use limit orders to trade stocks at a specific price. Know that there’s no guarantee that the market will fulfill your limit order.
  • Market order: Place a market order to buy shares at the prevailing rate. Note that buy orders execute on the ask and sells on the bid (i.e., least favorable terms).
  • Stop-loss order: Stop-loss orders protect you by exiting out of your position at a predetermined price or the next available price, whichever comes first. Beware of gap-down sessions, which may cause your stop-loss order to fill well below your predetermined price.
  • Stop-limit order: For complete control, use a stop-limit order to only fulfill automated exits at a specific price. Again, you have no guarantee that the market will fulfill your stop-limit order.

Step 4: Execute your trade. 

To execute a market order, follow these steps:

  1. Select action type (buy or sell).
  2. Enter the shares you want to acquire (or sell).
  3. Hit the Buy (or Sell) button.

Use the same steps for limit orders, except that you must also enter your desired execution price.

A Potentially Surprising Debutant

Though a quirky business as far as publicly traded companies go, Mister Car Wash nevertheless offers critical insights in the consumer economy. If sentiment for a recovery is strong, more people will likely take advantage of Mister Car Wash’s services. Furthermore, the return of automotive traffic combined with key demographic changes supports the bullish case for MCW stock.

Related content: BEST CAR WASH INSURANCE

About Joshua Enomoto

His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.