Bloomberg News

LKQ Drops as Short Seller Prescience Says Growth Is Overstated

January 15, 2014

LKQ Corp. (LKQ:US) fell the most in 10 months after short-seller Prescience Point Research Group said the auto-parts repair service has exaggerated revenue growth.

LKQ slid 8.9 percent to $29.42 as of 12:08 p.m. in New York, the biggest intraday decline since last February. About 11 million shares changed hands, eight times the one-year average. Prescience Point said its share-price target for the company is between $10 and $15.

Prescience Point, which says on its website that it’s co-founded by a former investment banker at Barclays Plc and Credit Suisse Group AG, said profits at LKQ have been amplified by acquisitions. The company also faces declining demand for its auto parts, the report said. Joseph Boutross, a spokesman for Chicago-based LKQ, didn’t immediately respond to two phone calls or an e-mail seeking comment.

Research firms, such as Prescience Point, study a company’s financial statements and try to profit by borrowing shares and selling them with the aim of buying the stock back at a lower price and pocketing the difference. Prescience Point said in the report that it will make money from a retreat in LKQ shares.

About 0.3 percent of LKQ’s outstanding shares have been sold short, according to data compiled by Markit, a London-based research firm. The average short interest for a company in the Russell 1000 Index is 2.7 percent.

Revenue growth for parts and services was “strong” during the third quarter, Robert Wagman, chief executive officer of LKQ, said in the company’s third-quarter earnings statement. In August, the company said it bought five paint distributors in the U.K. as it expands globally.

Investors should buy LKQ shares after the decline today, Stifel Nicolaus said in a research report. The company’s management has “best in class” practices and growth is above average from acquisitions, James Albertine wrote in note.

To contact the reporter on this story: Callie Bost in New York at cbost2@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • LKQ
    (LKQ Corp)
    • $26.85 USD
    • -0.47
    • -1.77%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus