Advance Auto Parts (AAP) AI Stock Analysis

• Market Cap: $2.00B
• Dividend Yield: 2.99%
• Average Volume (3M): 2.27M
• Price to Earnings (P/E): 59.6
• Beta (1Y): 0.71
• Revenue Growth: -9.34%
• EPS Growth: -852.37%
• Country: US
• Employees: 33,200
• Sector: Consumer Cyclical
• Sector Strength: 59
• Industry: Specialty Retail
• EPS (TTM): -5.62
• Shares Outstanding: 59,833,138
• 10 Day Avg. Volume: 1,623,180
• 30 Day Avg. Volume: 2,266,690
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 2.46
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 1.44
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $41.62
• Price Target Upside: 24.57% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 16

Advance Auto Parts is facing substantial financial and operational challenges, reflected in negative profitability and weak cash flow performance. The technical indicators suggest a bearish trend, and although the dividend yield is relatively attractive, the negative P/E ratio indicates profitability concerns. Strategic initiatives are in place to address these issues, but the company faces significant hurdles in achieving financial stability.

Positive Factors

Contracts and Partnerships

Advance recently signed a multi-year contract extension with its largest national account.

Cost Management

Gross margin improvement is expected to ramp with AAP addressing the tariff issue and working with vendors to manage costs/pricing.

Leadership and Strategy

CEO Shane O'Kelly has properly identified and is addressing AAP’s challenges, and now, having met his executive team, the quality and focus are impressive.

Negative Factors

Financial Performance

Confidence in the turnaround is waning quickly due to atypical GM weakness and a weak free cash flow outlook.

Market Sentiment

Estimates have been lowered, with a decrease in the target price to $40, reflecting a less optimistic outlook on future performance.

Sales Performance

The first quarter sales started off slower than expected, raising concerns about meeting yearly guidance.

Advance Auto Parts Business Overview & Revenue Model

Company Description

Advance Auto Parts, Inc. provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks. The company offers battery accessories; belts and hoses; brakes and brake pads; chassis and climate control parts; clutches and drive shafts; engines and engine parts; exhaust systems and parts; hub assemblies; ignition components and wires; radiators and cooling parts; starters and alternators; and steering and alignment parts. It also offers air conditioning chemicals and accessories; air fresheners; antifreeze and washer fluids; electrical wires and fuses; electronics; floor mats, seat covers, and interior accessories; hand and specialty tools; lighting products; performance parts; sealants, adhesives and compounds; tire repair accessories; vent shades, mirrors and exterior accessories; washes, waxes and cleaning supplies; and wiper blades. In addition, the company offers air filters; fuel and oil additives; fuel filters; grease and lubricants; motor oils; oil filters, part cleaners and treatments; and transmission fluids for engine maintenance. Further, it offers battery and wiper installation; engine light scanning and checking; electrical system testing; video clinic; oil and battery recycling; and loaner tool program services. Additionally, the company sells its products through its website. It serves professional installers and do-it-yourself customers. The company operates stores under the Advance Auto Parts, Autopart International, and Carquest brands, as well as branches under the Worldpac name. As of April 23, 2022, it operated 4,687 stores and 311 branches in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada; and served 1,318 independently owned Carquest branded stores in Mexico, Grand Cayman, the Bahamas, Turks and Caicos, and the British Virgin Islands. The company was founded in 1929 and is based in Raleigh, North Carolina.

How the Company Makes Money

Advance Auto Parts makes money through the sale of automotive parts and accessories, targeting both professional customers and DIY enthusiasts. The company's key revenue streams include the retail sales of replacement parts such as brake pads, batteries, and engine components, as well as accessories like floor mats and seat covers. Additionally, Advance Auto Parts benefits from a robust commercial segment that supplies parts directly to professional mechanics and repair shops. The company also generates revenue through its e-commerce platform, which complements its physical stores by providing customers with convenient online shopping options. Significant partnerships with automotive manufacturers and suppliers enhance its product offerings, contributing to its revenue growth.

Advance Auto Parts Financial Statement Overview

Summary

Advance Auto Parts faced a challenging year with declining revenues, profitability, and cash flows. The company is experiencing operational and financial difficulties, as evidenced by negative net income and cash flow figures. While the balance sheet displays increased leverage, it remains stable in terms of assets. Strategic focus on improving operational efficiency and revenue growth is crucial moving forward.

Income Statement

Advance Auto Parts has experienced a significant decline in revenue and profitability. The gross profit margin decreased from 40.08% in 2023 to 37.48% in 2024, and the company recorded a net loss in 2024, resulting in a negative net profit margin of -3.69%. The revenue growth rate was -19.48% from 2023 to 2024, reflecting a considerable drop in sales. Additionally, both EBIT and EBITDA margins turned negative, indicating operational challenges.

Balance Sheet

The company's financial leverage has increased, with a debt-to-equity ratio of 1.70 in 2024 compared to 1.59 in 2023. The equity ratio also declined from 20.52% in 2023 to 20.10% in 2024, indicating decreased asset financing through equity. Return on equity was negative at -15.47% due to the net loss, highlighting profitability issues. The balance sheet shows increased financial risk but remains relatively stable in asset base.

Cash Flow

The operating cash flow decreased significantly to $84.63 million in 2024 from $287.38 million in 2023. Free cash flow was negative at -$96.17 million. The operating cash flow to net income ratio was -0.25, and the free cash flow to net income ratio was -0.29, both indicating weak cash generation relative to earnings. The overall cash flow performance reflects liquidity challenges.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Mar 2022	Mar 2021
Income Statement		Total Revenue
9.09B	11.29B	11.15B	11.00B	10.11B
	Gross Profit
3.41B	4.52B	4.96B	4.93B	4.48B
	EBIT
-713.31M	114.38M	714.15M	838.72M	749.91M
	EBITDA
-395.08M	426.36M	939.22M	1.10B	947.98M
	Net Income Common Stockholders
-335.79M	29.73M	464.40M	596.62M	493.02M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.87B	503.47M	270.81M	601.43M	834.99M
	Total Assets
10.80B	12.28B	11.99B	12.19B	11.84B
	Total Debt
3.69B	4.00B	3.65B	3.37B	3.05B
	Net Debt
1.82B	3.50B	3.38B	2.77B	2.21B
	Total Liabilities
8.63B	9.76B	9.39B	9.07B	8.28B
	Stockholders Equity
2.17B	2.52B	2.60B	3.13B	3.56B
Cash Flow		Free Cash Flow
-96.17M	44.96M	296.26M	822.62M	701.88M
	Operating Cash Flow
84.63M	287.38M	722.22M	1.11B	969.69M
	Investing Cash Flow
1.35B	-235.49M	-424.45M	-287.31M	-266.90M
	Financing Cash Flow
-75.01M	189.27M	-620.70M	-1.06B	-286.00M

Advance Auto Parts Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 33.41
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AAP, the sentiment is Neutral. The current price of 33.41 is above the 20-day moving average (MA) of 32.58, below the 50-day MA of 35.62, and below the 200-day MA of 42.81, indicating a neutral trend. The MACD of -0.93 indicates Negative momentum. The RSI at 46.80 is Neutral, neither overbought nor oversold. The STOCH value of 57.03 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for AAP.

Advance Auto Parts Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MELI	78 Outperform	$101.24B	52.98	51.50%	―	43.56%	91.72%
GPC	76 Outperform	$15.99B	17.81	19.19%	3.35%	1.99%	-32.18%
AZO	70 Outperform	$62.45B	25.04	-14.95%	―	4.72%	4.69%
ORLY	70 Outperform	$80.50B	34.46	-174.09%	―	4.90%	3.28%
Sector *	61 Neutral	$6.65B	11.70	3.09%	3.98%	2.65%	-20.82%
BBWI	58 Neutral	$6.64B	8.64	-52.83%	2.66%	-1.63%	-5.94%
AAP	46 Neutral	$2.00B	59.62	-23.45%	2.99%	-9.34%	-852.37%

Advance Auto Parts Corporate Events

Advance Auto Parts EVP Herman Word to Retire

Herman L. Word, Jr., Executive Vice President of Professional, Independents and Canada at Advance Auto Parts, Inc., will retire effective April 15, 2025, and will remain in a transition role until May 16, 2025. The company acknowledges Mr. Word’s over 20 years of service and will provide him with a resignation payment as per his amended employment agreement.

Advance Auto Parts Announces Executive Retirement Plan

Tammy M. Finley, Executive Vice President, General Counsel and Corporate Secretary of Advance Auto Parts, will retire on March 2, 2025, serving in an advisory role until May 2, 2025, to facilitate a smooth transition. Her departure triggers a termination without due cause payment, and the company acknowledges her over 25 years of service in legal and human resources roles.