AAP

Advance Auto Parts Inc

Consumer, Industrial/Transportation


Presented:01/31/2022
Price:$231.51
Cap:$14.44B
Current Price:$39.47
Cap:$2.36B

Presented

Date01/31/2022
Price$231.51
Market Cap$14.44B
Ent Value$16.61B
P/E Ratio23.43x
Book Value$51.22
Div Yield1.4%
Shares O/S62.36M
Ave Daily Vol652,078
Short Int4.72%

Current

Price$39.47
Market Cap$2.36B
Advance Auto Parts, Inc. engages in the supply and distribution of aftermarket automotive products for both professional installers and do-it-yourself customers. It operates through the following segments: Northern Division, Southern Division, Carquest Canada, Independents and Worldpac. Advance Auto Parts offers replacement parts, performance parts, accessories, oil and fluids, engine parts, brakes, batteries, accessories, and tools and garage. The company was founded by Arthur Taubman in 1929 and is headquartered in Raleigh, NC.

Publicly traded companies mentioned herein: Advance Auto Parts Inc (AAP), Amazon.com Inc (AMZN), AutoZone Inc (AZO), O’Reilly Automotive Inc (ORLY)

Highlights

The presenter is short shares of Advance Auto Parts Inc (AAP), which he expects will fail to execute on the turnaround story focused on margin expansion and market share gains that bullish investors are excited about. Management gave fairly aggressive three-year targets during the April 2021 Investor Day and AAP’s performance has been strong over the last couple quarters, leading to the improved investor sentiment, but the presenter feels this is reminiscent of the previous failed turnaround story led by the same management team. On top of this, AAP and its peers (AZO, ORLY) had traded down to 13x – 14x earnings at times in the years leading up to COVID on the back of several secular concerns, but AAP’s multiple is back up to 18x earnings despite these headwinds continuing to build. This year, AAP will also be comping against a strong 2021 macroeconomic environment. As the turnaround story disappoints and the exogenous factors roll through AAP’s financials, the presenter believes the company will miss earnings and the multiple will contract to ~13x, creating 40% downside to the stock over the next couple of years. Even if the multiple only falls to 16x, that would offer 25% downside to the current share price. 

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Idea Discussion

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