Advance Auto Parts (AAP) AI Stock Analysis

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Advance Auto Parts

(NYSE:AAP)

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Neutral 48 (OpenAI - 4o)

Rating:48Neutral

Price Target:

$51.00

▲(19.19% Upside)

The overall stock score is primarily impacted by the company's financial challenges, including declining revenue and profitability, as well as negative cash flow. While the earnings call provided some positive strategic insights, the technical analysis and valuation metrics indicate bearish trends and unattractive valuation.

Positive Factors

Operating Margin Expansion

Significant margin expansion indicates improved operational efficiency and cost management, enhancing long-term profitability potential.

Strategic Debt Reorganization

Proactive debt management strengthens the balance sheet, providing financial flexibility for future growth and stability.

Market Hub Expansion

Expanding market hubs supports strategic growth and market share gain, positioning the company for long-term competitive advantage.

Negative Factors

Declining Net Sales

A decline in net sales indicates potential challenges in maintaining market share and revenue growth, impacting long-term financial health.

Negative Free Cash Flow

Negative free cash flow suggests cash management issues, limiting the company's ability to invest in growth and meet financial obligations.

Supplier Bankruptcy Concerns

Supplier bankruptcy poses risks to supply chain stability and could lead to future credit losses, affecting operational continuity.

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

Market Cap

$2.65B

Dividend Yield2.34%

Average Volume (3M)1.39M

Price to Earnings (P/E)―

Beta (1Y)0.61

Revenue Growth-19.41%

EPS Growth-957.94%

CountryUS

Employees33,200

SectorConsumer Cyclical

Sector Strength84

IndustrySpecialty Retail

Share Statistics

EPS (TTM)0.92

Shares Outstanding60,022,243

10 Day Avg. Volume1,523,873

30 Day Avg. Volume1,390,535

Financial Highlights & Ratios

PEG Ratio<0.01

Price to Book (P/B)1.21

Price to Sales (P/S)0.29

P/FCF Ratio-27.33

Enterprise Value/Market Cap2.18

Enterprise Value/Revenue0.67

Enterprise Value/Gross Profit1.81

Enterprise Value/Ebitda-14.50

Forecast

1Y Price Target

$56.38

Price Target Upside31.76% Upside

Rating ConsensusHold

Number of Analyst Covering17

EPS Forecast (FY)1.81

Revenue Forecast (FY)$8.58B

Advance Auto Parts Business Overview & Revenue Model

Company DescriptionAdvance Auto Parts, Inc. is a leading retailer of automotive aftermarket parts, accessories, and maintenance items in North America. Founded in 1932 and headquartered in Raleigh, North Carolina, the company operates thousands of stores and distribution centers. It serves both professional installers and do-it-yourself customers, offering a wide range of products including batteries, brakes, filters, fluids, and various vehicle accessories. Advance Auto Parts also provides services such as battery installation and engine diagnostics, enhancing its value proposition in the automotive maintenance sector.

How the Company Makes MoneyAdvance Auto Parts generates revenue primarily through the sale of automotive parts and accessories in its retail stores and online platforms. The company's revenue model is based on a combination of direct sales to consumers and professional installers, where it sells products like replacement parts, tools, and maintenance items. Key revenue streams include in-store sales, e-commerce sales, and professional services. Additionally, Advance Auto Parts has established partnerships with various automotive suppliers and manufacturers, which help ensure a broad product offering and competitive pricing. Factors contributing to its earnings include the growing demand for vehicle maintenance, the increasing complexity of automotive technology that necessitates professional repairs, and strong brand recognition among consumers.

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:

The Fly

Advance Auto Parts Earnings Call Summary

Earnings Call Date:Oct 30, 2025

(Q3-2025)

% Change Since: |

Next Earnings Date:Mar 04, 2026

Earnings Call Sentiment Neutral

The earnings call reflected a mix of positive strategic achievements such as sales growth and margin expansion, alongside challenges like a decline in net sales and negative free cash flow. The company is actively managing its strategic initiatives and anticipates future growth, but faces short-term consumer spending pressures and supplier-related risks.

Q3-2025 Updates

Positive Updates

Strong Comparable Sales Growth

The company reported a 3% growth in comparable sales for the third quarter, with both Pro and DIY channels delivering growth.

Significant Operating Margin Expansion

Adjusted operating margin expanded by 370 basis points year-over-year to 4.4%, marking the strongest margin in over two years.

Proactive Debt Reorganization

The company strengthened its balance sheet by reorganizing its debt capital structure, raising nearly $2 billion in cash to enhance liquidity and aiming for an investment-grade credit rating.

Strategic Partnership and Vendor Alignment

Positive vendor reactions to strategic actions such as exiting underperforming markets and investing in new stores, leading to improved product margins.

Market Hub Expansion

Opened 6 new locations in Q3, with plans to end the year with 33 market hubs, supporting a strategic expansion and market share gain.

Negative Updates

Net Sales Decline

Net sales from continuing operations were $2 billion, a decline of 5% compared to last year, primarily due to store optimization activities.

Negative Free Cash Flow

Year-to-date free cash flow is negative $277 million, driven largely by payments for inventory purchased in Q3 last year.

Potential Volatility in Sales Trends

The company anticipates potential temporary volatility in sales trends as consumers manage household budgets in an inflationary environment.

Bankruptcy Concerns with Supplier

A noncash charge of $28 million was recorded due to bankruptcy proceedings of a supplier, reflecting potential future credit losses.

Company Guidance

During the Advance Auto Parts Third Quarter 2025 Earnings Conference Call, guidance was provided for the remainder of the fiscal year, reaffirming the midpoint of their prior comparable sales growth and adjusted operating margin guidance, which implies approximately 200 basis points of margin expansion for the year. The company reported a 3% growth in comparable sales for the third quarter, driven by both Pro and DIY channels. Adjusted operating margin expanded by 370 basis points year-over-year to 4.4%. Despite a 5% decline in net sales to $2 billion due to store optimization activities, the company raised nearly $2 billion in cash, enhancing liquidity and setting a path to return to an investment-grade credit rating. Inflation in the auto aftermarket was cited as a factor influencing sales trends, with same SKU inflation expected to be about 4% in Q4. The company is projecting full-year net sales of $8.55 billion to $8.6 billion, with comparable sales growth between 0.7% to 1.3%. Adjusted operating income margin is expected to be between 2.4% and 2.6%, and adjusted EPS is projected to be between $1.75 and $1.85. Capital expenditures have been revised to approximately $250 million for the year, reflecting a shift in timing of projected spend into next year. Free cash flow guidance was adjusted to a range of negative $90 million to $80 million, with a strategic decision to carry higher inventory levels to improve depth and breadth of assortment.

Advance Auto Parts Financial Statement Overview

Summary

Advance Auto Parts is facing 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

Neutral

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

Neutral

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	8.59B	9.09B	9.21B	9.15B	11.00B	10.11B
Gross Profit	3.18B	3.41B	3.86B	4.23B	4.92B	4.48B
EBITDA	-397.75M	-395.08M	310.24M	759.36M	1.08B	947.98M
Net Income	-376.78M	-335.79M	29.73M	464.40M	596.62M	493.02M
Balance Sheet
Total Assets	12.06B	10.80B	12.28B	11.99B	12.19B	11.84B
Cash, Cash Equivalents and Short-Term Investments	3.17B	1.87B	503.47M	270.81M	601.43M	834.99M
Total Debt	5.26B	3.69B	3.83B	3.65B	3.37B	3.05B
Total Liabilities	9.86B	8.63B	9.76B	9.39B	9.07B	8.28B
Stockholders Equity	2.19B	2.17B	2.52B	2.60B	3.13B	3.56B
Cash Flow
Free Cash Flow	-401.39M	-96.17M	61.70M	335.91M	817.38M	701.88M
Operating Cash Flow	-191.30M	84.63M	287.38M	736.57M	1.11B	969.69M
Investing Cash Flow	1.34B	1.35B	-235.49M	-424.45M	-287.31M	-266.90M
Financing Cash Flow	1.54B	-75.01M	189.27M	-620.70M	-1.06B	-286.00M

Advance Auto Parts Technical Analysis

Technical Analysis Sentiment

Negative

Last Price42.79

Price Trends

50DMA

50.87

Negative

100DMA

54.93

Negative

200DMA

48.82

Negative

Market Momentum

MACD

-1.83

Positive

RSI

31.13

Neutral

STOCH

4.61

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AAP, the sentiment is Negative. The current price of 42.79 is below the 20-day moving average (MA) of 49.65, below the 50-day MA of 50.87, and below the 200-day MA of 48.82, indicating a bearish trend. The MACD of -1.83 indicates Positive momentum. The RSI at 31.13 is Neutral, neither overbought nor oversold. The STOCH value of 4.61 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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
RVLV	77 Outperform	$2.00B	35.61	12.19%	―	9.24%	35.68%
ASO	75 Outperform	$3.58B	9.81	18.34%	0.93%	-0.65%	-10.35%
GPC	69 Neutral	$18.01B	22.30	17.05%	3.22%	3.26%	-25.41%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%
EYE	55 Neutral	$2.27B	-845.24	-0.37%	―	-1.58%	85.04%
BBWI	53 Neutral	$4.02B	6.04	―	4.07%	-1.04%	-20.88%
AAP	48 Neutral	$2.65B	-6.78	-23.85%	2.34%	-19.41%	-957.94%

* Consumer Cyclical Sector Average

Performance Comparison

AAP

Advance Auto Parts

42.79

0.78

1.86%

GPC

Genuine Parts Company

128.06

16.07

14.35%

BBWI

Bath & Body Works

19.67

-17.59

-47.21%

EYE

National Vision Holdings

28.40

17.15

152.44%

RVLV

Revolve Group

27.42

-6.27

-18.61%

ASO

Academy Sports and Outdoors

54.12

-1.37

-2.47%

Advance Auto Parts Corporate Events

Executive/Board Changes

Advance Auto Parts Director Announces Retirement

Neutral

Oct 30, 2025

On October 27, 2025, Jeffrey J. Jones II announced his intention to retire from the Board of Directors of Advance Auto Parts, Inc. at the end of the year. His departure will coincide with his planned retirement as President and CEO of H&R Block, Inc., and will result in the reduction of the company’s board size to eight directors.

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: Nov 30, 2025