Car Parts (PRTS)

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More ... latest change: 2026-02-22

Deep Value? Dumpster Diving? Strategic Turnaround? Welcome to Carparts.com (PRTS) PRTS strategic review resulted in a multi-pronged investment from three parties rather than a sale. With valuation remaining at sub-basement levels, I'll stick around to see if management can execute. ELMER SPUD SEP 26

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Carparts.com (PRTS) is a microcap online retailer of, you guessed it, car parts. They offer one million SKUs via their website, mobile apps, as well as eBay.

The company’s annual revenue is approximately $600 million. Annual gross profit on that revenue is approximately $200 million. PRTS’ market cap is approximately $55 million (after reflecting the issuance of 10 million new shares as part of the recent strategic investment). Enterprise value, depending on how one pencils it out, is probably close to $0 if not negative.

If management can improve operations on the back of this new investment and achieve their stated goal of ~~6-8% EBITDA margins (~~$35-50m on the current relatively stagnant $600m revenue base), it’s not hard to imagine how PRTS could 5-10x (or more modestly 2-3x if the business can even just stabilize). But of course, when a company trades at 0.1x revenue, 0.3x gross margin, and ~$0 enterprise value, other market participants aren’t too bullish on management righting the ship.

I was not following the company during its brief golden era during the COVID age, but the company was able to successfully albeit mostly temporarily capitalize on the acceleration of online commerce. Revenue doubled, operating income was ~breakeven and EBITDA was positive for a few years (with EBITDA peaking at $14.4m in 2022).

The share price reacted as you would expect (to be fair, there was likely a further benefit from the free money, bidding-up-any-shitco-especially-if-there-was-a-vaguely-internet-angle-to-it era) - approximately 10xing while financial performance was increasing and stocks were memeing, before giving it all back as the company’s sales declined and then stagnated and profitability slipped away.

So at this point what can give one any confidence that there is hope for a turnaround?

Well, zero-thly, for me personally, when my view on the possible outcomes is “if this goes well it’s a 5x+, if this goes poorly I’ll eventually sell for a 50% loss” my hurdle for how likely the thing is to work is pretty low. For a less speculative investor, I can understand that may not be good enough, and the below analysis is pretty light on facts and figures and a little more about the vibes.

Now firstly - taking the press release at face value (pretty much all the information I have to go off of at this point), I actually really like the strategic investment. I admittedly was hoping for a quick sale at a 150% premium as I had already owned shares before and after announcement of the strategic review, but I can understand why management took this route. (Note: I am not a strategic investment professional so I have no idea if those who do this for their livelihood would tell me ten reasons why that read is wrong - but I’ll talk about it as relative layperson.)

The strategic investment had three parties involved. Plagiarizing from the press release, they are described as (and I fully admit these are three Far East entities that I have never heard of previously):

ZongTeng Group, a world-class distribution and logistics powerhouse - With over 10,000 employees worldwide, Zongteng Group operates four self-owned B777F cargo aircraft, fulfills over 2.5 million parcel orders daily, and operates a total e-commerce fulfillment space exceeding 24 million square feet. The company serves over 60,000 global cross-border e-commerce sellers. A-Premium, a recognized global leader in mechanical parts procurement, marketing and e-commerce - With nearly 150,000 high-quality SKUs covering a full range of mechanical and performance parts, A-Premium serves customers across numerous countries and regions worldwide. Its commitment to first-to-market products, premium packaging, and bundled solutions has made it a trusted name for both professional installers and DIY enthusiasts. CDH Investments is one of the first Asia-focused alternative asset managers, with around $20 billion of assets under management. The investment has multiple financial components:

CarParts.com will issue approximately 10.3 million new common shares at $1.04 per share to the investor group, which represents a premium of 18% to CarParts.com’s 90-day volume-weighted average price. CarParts.com is also issuing convertible notes to ZongTeng Group and CDH Investments in an aggregate principal amount of $25 million with a three-year term, a two percent annual interest rate and a conversion price of $1.20 per common share. And multiple operational components:

CarParts.com and A-Premium have also entered a long-term commercial partnership that will provide CarParts.com customers access to over 150,000 additional products, including proprietary kits and bundles. Together with A-Premium, CarParts.com will provide customers with a significantly broader and more complete solution for their automotive needs, further strengthening CarParts.com’s position as a one-stop destination for both do-it-yourself (DIY) customers and professional installers. CarParts.com and ZongTeng Group will work together to find ways to leverage ZongTeng Group’s world-class distribution and logistics expertise to accelerate CarParts.com’s ability to deliver parts faster and more efficiently. The possibility of using ZongTeng Group’s advanced logistics network positions CarParts.com to reduce delivery times, improve inventory management, and lower fulfillment costs, all of which directly benefit U.S. consumers. So, taken at face value, Carparts gains 1) a supplier of new products that’s far more invested in the reseller’s success than would be typical, 2) a partnership with a logistics firm, which I imagine will aid in navigating ongoing tariff concerns, inventory management, etc. better than PRTS would have been able to do on its own, and 3) capital at advantageous terms - ~20% initial dilution at what seems to me to be a very fair share price and a convertible loan at a very very low interest rate (with the caveat being that the $1.20 conversion price and further 30% dilution at that price will be massively dilutive to current holders, but I kind of see it as a “heads we all lose in 3 years if this doesnt work out, tails we [the strategic investors] get a little bit more of your pie than you’d like to give up because we saved your company”).

The two operational partners, to the extent they are actually in it to win it, should be able to help with the primary challenges plaguing PRTS (and specifically their margins) - much of their business is selling relatively commoditized products at razor thin/negative (accounting for marketing spend) margins, and often through eBay which is taking their own cut. Reducing marketing expense (which is not captured in gross profit) as a percentage of revenue is probably the most important factor to overall profitability. If Carparts.com can become a primary US seller of new unique offerings from A-Premium (especially if sold through their website), that’s likely to be a much higher margin/lower marketing expense sale than selling the generic Prius taillight replacement bulb on eBay. Additionally, with the recent suspension of the duty free de minimis exemption (but who knows if/when/how many times that will change), one would think that some volume will shift from international sellers to US sellers and larger volume operations like PRTS should be the marginal beneficiaries.

Of course, things could also work out poorly, and PRTS drowns in channel-stuffed A-Premium SKUs that no one wants. That’s the kind of risk inherent in dumpster diving.

Secondly, before this strategic investment - honestly the business was in OK enough shape. It of course was not improving, and losing money, but it wasn’t actively dying either. Management was in the middle of executing cost savings initiatives that were supposed to save $10 million per year (largely dealing with logistics consolidation) that if true would bring the company close to EBITDA breakeven. There was no imminent bankruptcy risk - the company has a cash position that’s a couple years of current burn, plus a positive net working capital balance that’s another few years of current burn, plus a ton of room to draw on a revolver - so the left for dead valuation seems very overly bearish to me.

I have had success investing in companies in similar situations in the past. Blue Apron (old ticker APRN) was one example. It was in similar financial position - extremely cheap on a price to sales/gross profit/anything other than net income (because they didn’t generate any) metric. They eventually were acquired for a ~150% premium once they had done a bit to get their financial house in order (in their case, if I remember correctly, a sale of production equipment that took the company from a liquidity-worry to multiple-years-of-burn cash position - which again, PRTS has already “solved” by not being there in the first place).

Should things go right, I imagine this could go very right. Management now has far more time to see their cost savings, website/app transition, and other normal business developments through, as well as adding three external parties with a vested interest in figuring out the path to profitability.

It’s a mostly pointless exercise to try to predict price targets based on “if EBITDA is X in 3 or 5 years, the appropriate multiple is exactly 13.5 and the price per share will be $XX” (trust me, I typed a few versions of that out before going with this instead) but it’s easy to appreciate that businesses, if/when they are on a sustainable trajectory towards profitability, will almost certainly no longer trade at 0.1x sales and 0.3x gross profit. Plus, it’s a microcap, so if these new owners of 10 million shares decide to sell, or Reddit degenerates decide to buy, the price can very quickly be affected.

We shall see how this turns out.

Reader note: even moreso than my usual, this one is risky so as always, this is certainly never investing advice.

Disclosure: long a lot at .90 cost basis

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last updated: 2026-02-22