Joyride Is Nearly Over for Auto Parts Stocks: Jonathan Levin

Used-car sales have sputtered and new-car revenue growth looks uninspiring. But top-line growth is still strong in one corner of the auto market: parts. The jump in car prices has made drivers more inclined to hold on to their vehicles, and the aging fleet means a greater need for maintenance. That helps explain the recent bull market in stocks of parts retailers. But while the trend may have room to run, the extraordinary updraft in the stocks probably doesn’t.

First, consider the affordability crisis that created these unusual dynamics. The average new-car payment surged to $730 in March, up 27% ...