Advance Auto Parts (AAP) AI Stock Analysis

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Advance Auto Parts

(NYSE:AAP)

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Neutral 54 (OpenAI - 4o)

Rating:54Neutral

Price Target:

$63.00

▲(3.19% Upside)

The overall stock score is primarily impacted by significant financial challenges, including declining revenues and operational inefficiencies. While technical analysis shows positive momentum, the valuation is weak due to negative earnings. The earnings call provided some positive outlooks, but concerns about sales decline and financial constraints remain.

Positive Factors

Pro Business Growth

The growth in the Pro business segment indicates a solid demand from professional installers, which can drive sustained revenue and market presence in the long term.

SKU Expansion

Expanding product offerings enhances customer choice and can improve sales, positioning the company as a comprehensive supplier in the automotive aftermarket.

Supply Chain Improvements

Enhancements in supply chain efficiency can lead to better inventory management and customer satisfaction, supporting long-term operational success.

Negative Factors

Declining Revenue

A decline in revenue signals potential market share loss and challenges in maintaining growth, impacting long-term financial health.

High Leverage

High leverage increases financial risk and limits flexibility, potentially hindering the company's ability to invest in growth and weather economic downturns.

Negative Free Cash Flow

Negative free cash flow indicates cash constraints, which can restrict the company's ability to fund operations and strategic initiatives without external financing.

Advance Auto Parts (AAP) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$3.61B

Dividend Yield1.66%

Average Volume (3M)1.81M

Price to Earnings (P/E)59.6

Beta (1Y)0.62

Revenue Growth-22.50%

EPS Growth-35219.23%

CountryUS

Employees33,200

SectorConsumer Cyclical

Sector Strength84

IndustrySpecialty Retail

Share Statistics

EPS (TTM)0.69

Shares Outstanding59,984,947

10 Day Avg. Volume1,883,126

30 Day Avg. Volume1,814,808

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)N/A

P/FCF RatioN/A

Enterprise Value/Market Cap1.60

Enterprise Value/Revenue0.61

Enterprise Value/Gross Profit1.66

Enterprise Value/Ebitda-12.84

Forecast

1Y Price Target

$58.42

Price Target Upside-4.31% Downside

Rating ConsensusHold

Number of Analyst Covering18

Advance Auto Parts Business Overview & Revenue Model

Company DescriptionAdvance 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 MoneyAdvance Auto Parts generates revenue primarily through the sale of automotive parts and accessories in its retail stores and online. The company operates on a multi-channel retail model, allowing it to reach customers through brick-and-mortar locations as well as digital platforms. Key revenue streams include sales from over 4,800 stores across the United States, Canada, and Puerto Rico, as well as online sales through its website and mobile app. Additionally, Advance Auto Parts benefits from partnerships with major automotive manufacturers and suppliers, which help to ensure a diverse and reliable product inventory. The company also generates income through its professional sales business, which serves automotive repair shops and commercial accounts, further diversifying its revenue base.

Advance Auto Parts Key Performance Indicators (KPIs)

Any

Store Count

Store Count
Indicates the total number of retail locations, reflecting the company's market presence and potential reach to customers. A growing store count can signal expansion and increased sales opportunities.

Chart InsightsAdvance Auto Parts has steadily increased its store count from 2020 to 2024, but recent strategic store closures are set to impact future sales. The closures, aimed at enhancing liquidity and operational efficiency, align with the company's guidance of a 5% to 8% sales reduction in 2025. Despite these closures, the expansion of market hub stores is driving above-target sales growth, indicating a strategic shift towards optimizing store performance rather than sheer store count expansion. This approach is crucial as the company navigates a challenging consumer environment and seeks to improve profitability.

Data provided by:

Main Street Data

Advance Auto Parts Earnings Call Summary

Earnings Call Date:Aug 14, 2025

(Q2-2025)

% Change Since: |

Next Earnings Date:Nov 12, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted a return to profitability, growth in the Pro business, and strategic initiatives in SKU expansion and supply chain management. However, challenges remain with net sales decline, underperformance in the DIY channel, tariff impacts, and stagnant SG&A and gross margin improvements.

Q2-2025 Updates

Positive Updates

Return to Profitability

Advance Auto Parts achieved a return to profitability in Q2, supported by actions to optimize their store footprint and strategic initiatives.

Pro Business Growth

The Pro business continued to deliver positive comparable sales growth, contributing to a stronger performance in Q2.

SKU Expansion and Assortment Management

The company added more than 60,000 new SKUs year-to-date, up nearly 300% compared to last year, which improved store availability KPI by approximately 100 basis points.

Debt Capital Structure Reorganization

Advance Auto Parts completed a debt offering of $1.95 billion of senior notes and entered a new $1 billion asset-backed revolving credit facility to ensure financial flexibility.

Improved Supply Chain and Market Hub Expansion

Closed or converted 9 DCs year-to-date and improved operations, with market hubs showing an average estimated comparable sales uplift of 100 basis points.

Negative Updates

Net Sales Decline

Net sales from continuing operations were $2 billion, an 8% decline compared to last year, mainly due to store optimization activities.

DIY Channel Underperformance

The DIY channel underperformed with a low single-digit sales decline, although it showed signs of stabilization.

Tariff Impact and Consumer Behavior Concerns

Tariffs are expected to have a more pronounced impact in the second half of the year, with concerns about consumer recalibration and purchasing habits.

SG&A and Gross Margin Challenges

SG&A from continuing operations was about flat, and adjusted gross profit was $880 million, resulting in only about 16 basis points of gross margin expansion.

Company Guidance

During the Advance Auto Parts Second Quarter 2025 Earnings Conference Call, the company provided several metrics and insights into its financial performance and future guidance. The company reported net sales from continuing operations of $2 billion, an 8% decline compared to the previous year, with comparable sales growth of 0.1%. The gross profit margin expanded by approximately 16 basis points to 43.8%, and the adjusted operating income margin was 3.0% of net sales, resulting in about 20 basis points of margin expansion. For fiscal year 2025, the company reaffirmed its sales guidance of $8.4 billion to $8.6 billion and adjusted operating income margin guidance of 2% to 3%. However, it revised its adjusted diluted EPS guidance to a range of $1.20 to $2.20 due to higher interest expenses associated with a recent debt issuance of $1.95 billion. The company also reported a free cash flow target for the year in the range of negative $85 million to negative $25 million. Looking ahead to 2027, Advance Auto Parts is targeting low single-digit comparable sales growth and an adjusted operating income margin of approximately 7%, with an updated leverage ratio target of approximately 2x to 2.5x.

Advance Auto Parts Financial Statement Overview

Summary

Advance Auto Parts is experiencing significant financial challenges, with declining revenues, operational inefficiencies, and net losses impacting profitability. The high leverage and weakened equity position further exacerbate financial risk. Cash flow constraints could hinder the company's ability to manage its financial obligations and invest in growth. Overall, the financial statements indicate a need for strategic adjustments to improve stability and financial health.

Income Statement

Negative

The income statement of Advance Auto Parts shows a challenging period with declining revenue and profitability. Gross Profit Margin for TTM is 36.96%, which demonstrates some strength in cost management. However, the Net Profit Margin is negative at -3.74%, indicating losses. Revenue growth has been negative over the past years, with a significant decline from 2023 to 2024. The company also faces negative EBIT and EBITDA margins at -9.34% and -4.78% respectively, pointing to operational inefficiencies.

Balance Sheet

Negative

Advance Auto Parts' balance sheet reveals a moderately leveraged position with a Debt-to-Equity Ratio of 1.67 in TTM. The Return on Equity is negative due to net losses, reflecting poor returns to shareholders. The Equity Ratio stands at 20.69%, which shows a reasonable proportion of equity financing but might be insufficient given the current financial strain. Overall, the balance sheet suggests potential financial risk due to high leverage and declining equity.

Cash Flow

Negative

The cash flow situation appears strained, with negative Free Cash Flow and a declining trend in Operating Cash Flow. The Operating Cash Flow to Net Income Ratio is negative, indicating operational cash flow is not sufficient to cover losses. Free Cash Flow to Net Income Ratio is also negative, highlighting cash constraints. This suggests the company might struggle to fund operations and growth without external financing.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	9.41B	9.09B	9.21B	9.15B	11.00B	10.11B
Gross Profit	3.48B	3.41B	3.86B	4.23B	4.92B	4.48B
EBITDA	-449.70M	-395.08M	310.24M	759.36M	1.08B	947.98M
Net Income	-351.80M	-335.79M	29.73M	464.40M	596.62M	493.02M
Balance Sheet
Total Assets	10.62B	10.80B	12.28B	11.99B	12.19B	11.84B
Cash, Cash Equivalents and Short-Term Investments	1.67B	1.87B	503.47M	270.81M	601.43M	834.99M
Total Debt	3.67B	3.69B	3.83B	3.65B	3.37B	3.05B
Total Liabilities	8.42B	8.63B	9.76B	9.39B	9.07B	8.28B
Stockholders Equity	2.20B	2.17B	2.52B	2.60B	3.13B	3.56B
Cash Flow
Free Cash Flow	-247.90M	-96.17M	44.96M	296.26M	822.62M	701.88M
Operating Cash Flow	-74.06M	84.63M	287.38M	722.22M	1.11B	969.69M
Investing Cash Flow	1.37B	1.35B	-235.49M	-424.45M	-287.31M	-266.90M
Financing Cash Flow	-64.41M	-75.01M	189.27M	-620.70M	-1.06B	-286.00M

Advance Auto Parts Technical Analysis

Technical Analysis Sentiment

Positive

Last Price61.05

Price Trends

50DMA

59.46

Positive

100DMA

52.80

Positive

200DMA

46.69

Positive

Market Momentum

MACD

0.59

Positive

RSI

53.15

Neutral

STOCH

36.82

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AAP, the sentiment is Positive. The current price of 61.05 is above the 20-day moving average (MA) of 60.73, above the 50-day MA of 59.46, and above the 200-day MA of 46.69, indicating a bullish trend. The MACD of 0.59 indicates Positive momentum. The RSI at 53.15 is Neutral, neither overbought nor oversold. The STOCH value of 36.82 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AAP.

Advance Auto Parts Risk Analysis

Advance Auto Parts disclosed 23 risk factors in its most recent earnings report. Advance Auto Parts reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Advance Auto Parts Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MELI	74 Outperform	127.30B	62.01	35.94%	―	38.27%	46.21%
ORLY	70 Neutral	87.79B	37.01	-196.75%	―	5.15%	5.33%
AZO	68 Neutral	69.87B	28.83	-64.50%	―	2.43%	-3.34%
GPC	67 Neutral	19.28B	23.88	17.20%	2.95%	2.65%	-32.91%
BBWI	63 Neutral	5.52B	7.90	-47.03%	2.99%	-0.18%	-18.95%
AAP	54 Neutral	$3.61B	59.62	-24.78%	1.66%	-22.50%	-35219.23%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%

* Consumer Cyclical Sector Average

Performance Comparison

AAP

Advance Auto Parts

61.05

21.78

55.46%

AZO

AutoZone

4,176.89

987.80

30.97%

GPC

Genuine Parts Company

138.61

1.54

1.12%

BBWI

Bath & Body Works

26.78

-4.15

-13.42%

MELI

Mercadolibre

2,510.97

410.76

19.56%

ORLY

O'Reilly Auto

103.47

26.16

33.84%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Sep 12, 2025