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Advance Auto Parts Inc (AAP)
NYSE:AAP

Advance Auto Parts (AAP) AI Stock Analysis

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AA

Advance Auto Parts

(NYSE:AAP)

Rating:52Neutral
Price Target:
$50.00
▲( 2.73% Upside)
Advance Auto Parts faces significant financial and operational challenges, reflected in its negative profitability and cash flow. While there are some positive signals in technical analysis and strategic initiatives, valuation concerns and mixed earnings call outcomes weigh on the stock. Improving financial performance and stabilizing cash flows are critical for future prospects.
Positive Factors
First Quarter Results
Advance Auto reported solid first-quarter results.
Stock Performance
The stock is up some 55% as shares benefit from an elevated short interest.
Strategic Initiatives
AAP is performing well on its strategic initiatives and delivering results above expectations.
Negative Factors
Consumer Environment
The DIY environment is expected to remain challenging given broad-based inflation and soft consumer sentiment.
Leverage and Cash Flow
Leverage is still around 4.5x with little evidence of free cash flow generation.
Market Share
The core business is still losing market share, and the anticipated second-half upside is difficult to grasp.

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

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 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 Key Performance Indicators (KPIs)

Any
Any
Store Count
Store Count
Indicates the total number of retail locations, reflecting the company's market presence, expansion strategy, and potential to capture customer demand in various regions.
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 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
45
Neutral
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
55
Neutral
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
50
Neutral
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 2024Dec 2023Dec 2022Mar 2022Mar 2021
Income StatementTotal Revenue
9.09B11.29B11.15B11.00B10.11B
Gross Profit
3.41B4.52B4.96B4.93B4.48B
EBIT
-713.31M114.38M714.15M838.72M749.91M
EBITDA
-395.08M426.36M939.22M1.10B947.98M
Net Income Common Stockholders
-335.79M29.73M464.40M596.62M493.02M
Balance SheetCash, Cash Equivalents and Short-Term Investments
1.87B503.47M270.81M601.43M834.99M
Total Assets
10.80B12.28B11.99B12.19B11.84B
Total Debt
3.69B4.00B3.65B3.37B3.05B
Net Debt
1.82B3.50B3.38B2.77B2.21B
Total Liabilities
8.63B9.76B9.39B9.07B8.28B
Stockholders Equity
2.17B2.52B2.60B3.13B3.56B
Cash FlowFree Cash Flow
-96.17M44.96M296.26M822.62M701.88M
Operating Cash Flow
84.63M287.38M722.22M1.11B969.69M
Investing Cash Flow
1.35B-235.49M-424.45M-287.31M-266.90M
Financing Cash Flow
-75.01M189.27M-620.70M-1.06B-286.00M

Advance Auto Parts Technical Analysis

Technical Analysis Sentiment
Positive
Last Price48.67
Price Trends
50DMA
34.86
Positive
100DMA
39.33
Positive
200DMA
40.95
Positive
Market Momentum
MACD
2.05
Negative
RSI
75.42
Negative
STOCH
65.96
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 48.67 is above the 20-day moving average (MA) of 34.42, above the 50-day MA of 34.86, and above the 200-day MA of 40.95, indicating a bullish trend. The MACD of 2.05 indicates Negative momentum. The RSI at 75.42 is Negative, neither overbought nor oversold. The STOCH value of 65.96 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 2 New Risks
1.
Restructuring our operations is a significant undertaking and introduces risk to the continuity and results of the Company's operations. Q4, 2024
2.
An unstable global economic and geopolitical landscape increases uncertainty about key areas of doing business internationally and may have a negative impact on our business. Q4, 2024

Advance Auto Parts Peers Comparison

Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
80
Outperform
$127.14B61.6949.11%41.92%81.11%
72
Outperform
$77.78B33.45-174.09%4.90%3.28%
GPGPC
71
Outperform
$17.52B20.7319.19%3.17%1.99%-32.18%
AZAZO
70
Outperform
$64.01B25.66-14.95%4.72%4.69%
64
Neutral
$6.45B8.38-52.83%2.55%-1.63%-5.94%
62
Neutral
$6.84B11.222.83%3.93%2.65%-21.93%
AAAAP
52
Neutral
$2.92B59.62-23.77%2.03%-16.55%-941.57%
* Consumer Cyclical Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
AAP
Advance Auto Parts
48.67
-19.84
-28.96%
AZO
AutoZone
3,826.46
1,026.46
36.66%
GPC
Genuine Parts Company
126.21
-11.30
-8.22%
BBWI
Bath & Body Works
30.27
-17.25
-36.30%
MELI
Mercadolibre
2,507.83
799.83
46.83%
ORLY
O'Reilly Auto
1,374.37
416.86
43.54%

Advance Auto Parts Earnings Call Summary

Earnings Call Date:May 22, 2025
(Q1-2025)
|
% Change Since: 55.45%|
Next Earnings Date:Aug 26, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted significant progress in strategic initiatives, better-than-expected performance in Q1 2025, and operational improvements. However, challenges remain with a decline in net sales, struggles in the DIY channel, and a negative free cash flow position. The positives seem to slightly outweigh the negatives, with a focus on future growth and strategic positioning.
Q1-2025 Updates
Positive Updates
Better-than-Expected Q1 2025 Performance
Advance Auto Parts delivered better-than-expected first quarter results, with Pro business growing in the low single-digit range and 8 consecutive weeks of positive comparable sales growth in the U.S.
Store Footprint Optimization Completion
The company completed its store footprint optimization program, with approximately 75% of the store footprint now concentrated in markets where Advance holds the #1 or #2 position based on store density.
Strategic Initiatives for Growth
Advance Auto Parts plans to open more than 100 new stores over the next 3 years and aims to establish 60 market hubs by mid-2027 to strengthen its competitive position.
Operational Improvements
The company reported stronger profitability with near breakeven adjusted operating margin and is on track to deliver positive operating margins starting in Q2 2025.
Improved Inventory and Merchandising
Advance Auto Parts expanded its new assortment framework to 10 additional DMAs, leading to an estimated uplift of nearly 50 basis points in comparable sales growth within these DMAs.
Negative Updates
Overall Sales Decline
Net sales from continuing operations were $2.6 billion, a 7% decrease compared to last year, mainly attributed to the store optimization activity.
DIY Channel Challenges
The DIY channel declined in the low single-digit range, with maintenance-related categories performing better, indicating cautious consumer spending.
Adjusted Operating Loss
The company reported an adjusted operating loss from continuing operations of $8 million or negative 30 basis points of net sales.
Negative Free Cash Flow
Advance Auto Parts ended Q1 2025 with negative free cash flow of $198 million compared to negative $49 million in the prior year.
Company Guidance
During the Advance Auto Parts First Quarter 2025 Earnings Conference Call, the company provided several key metrics and guidance updates. For the first quarter, net sales from continuing operations were reported at $2.6 billion, reflecting a 7% decrease compared to the previous year. The company experienced a comparable store sales decline of 60 basis points, excluding $51 million from liquidation sales related to store optimization activities. Despite the decline, the company's Pro business grew in the low single-digit range, with 8 consecutive weeks of positive comparable sales growth in the U.S. The adjusted operating loss was $8 million or negative 30 basis points of net sales, while the adjusted diluted loss per share from continuing operations was $0.22. The company reaffirmed its full-year 2025 guidance, expecting net sales between $8.4 billion and $8.6 billion, with a comparable sales growth of 50 to 150 basis points on a 52-week basis. Adjusted operating income margin is projected to be between 2% and 3%, with adjusted diluted EPS ranging from $1.50 to $2.50. Free cash flow is anticipated to be between negative $85 million and negative $25 million, factoring in cash expenses related to store and distribution center optimization activities.

Advance Auto Parts Corporate Events

Executive/Board ChangesShareholder Meetings
Advance Auto Parts Holds Annual Stockholders Meeting
Neutral
May 19, 2025

On May 15, 2025, Advance Auto Parts held its Annual Meeting of Stockholders, where several key decisions were made. The stockholders elected nine nominees to the Board of Directors, approved an amendment to increase shares in the Omnibus Incentive Compensation Plan, and ratified Deloitte and Touche LLP as the independent accounting firm for 2025. Additionally, a non-binding advisory vote approved executive compensation, while a shareholder proposal for additional executive stock retention requirements was rejected.

The most recent analyst rating on (AAP) stock is a Buy with a $55.00 price target. To see the full list of analyst forecasts on Advance Auto Parts stock, see the AAP Stock Forecast page.

Executive/Board Changes
Advance Auto Parts EVP Herman Word to Retire
Neutral
Mar 20, 2025

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.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.