Advance Auto Parts (AAP) AI Stock Analysis

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Advance Auto Parts

(NYSE:AAP)

Rating:55Neutral

Price Target:

$51.00

▼(-1.20%Downside)

Advance Auto Parts' overall stock score is weighed down by financial performance challenges, including declining revenues and negative cash flow. While technical indicators provide some short-term bullish signals, and strategic initiatives hint at future improvements, the current financial health and valuation remain concerns. The earnings call offers a cautiously optimistic outlook, but the company's financial stability needs significant improvement.

Positive Factors

Stock Performance

The stock is up some 55% as shares benefit from an elevated short interest.

Strategic Initiatives

Strategic initiatives are starting to show initial results, including market hubs, new assortment framework, and optimizing labor and vehicle schedules.

Negative Factors

Consumer Environment

The DIY environment is expected to remain challenging given broad-based inflation and soft consumer sentiment.

Earnings and Valuation

Advance Auto Parts' current P/E multiple appears extended relative to history.

Market Share

Recent data suggests Advance Auto Parts could be losing market share.

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

Market Cap

$3.09B

Dividend Yield2.04%

Average Volume (3M)4.10M

Price to Earnings (P/E)59.6

Beta (1Y)0.64

Revenue Growth-16.55%

EPS Growth-941.57%

CountryUS

Employees33,200

SectorConsumer Cyclical

Sector Strength60

IndustrySpecialty Retail

Share Statistics

EPS (TTM)-0.22

Shares Outstanding59,925,636

10 Day Avg. Volume3,684,253

30 Day Avg. Volume4,097,193

Financial Highlights & Ratios

PEG Ratio1.75

Price to Book (P/B)1.35

Price to Sales (P/S)0.00

P/FCF Ratio-11.95

Enterprise Value/Market Cap1.60

Enterprise Value/Revenue0.12

Enterprise Value/Gross Profit1.43

Enterprise Value/Ebitda-71.96

Forecast

1Y Price Target

$47.06

Price Target Upside-8.83% Downside

Rating ConsensusHold

Number of Analyst Covering20

Advance Auto Parts Business Overview & Revenue Model

Company DescriptionAdvance Auto Parts, Inc. (AAP) is a leading automotive aftermarket parts provider in North America, serving both professional installers and do-it-yourself (DIY) customers. The company operates in the retail sector, offering a wide selection of automotive parts, accessories, and maintenance items. With a broad network of stores and a strong online presence, Advance Auto Parts aims to meet the diverse needs of its customers by providing quality products and services that enhance vehicle performance and reliability.

How the Company Makes MoneyAdvance Auto Parts generates revenue primarily through the sale of automotive parts and accessories to both professional and DIY customers. The company's key revenue streams include retail sales from its physical store locations, e-commerce sales through its online platform, and commercial sales to professional installers and repair shops. Advance Auto Parts also benefits from strategic partnerships with automotive manufacturers and suppliers, which help ensure a steady supply of high-demand parts and exclusive product offerings. Additionally, the company offers various services such as battery testing and installation, which further contribute to its revenue. Factors such as competitive pricing, a wide product range, and a robust distribution network are significant contributors to Advance Auto Parts' earnings.

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:May 22, 2025

(Q1-2025)

% Change Since: 64.87%|

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 Financial Statement Overview

Summary

Advance Auto Parts faces significant financial challenges, including declining revenues, negative profit margins, and cash flow constraints. The income statement shows operational inefficiencies and net losses, while the balance sheet is moderately leveraged with high debt. The cash flow is negative, indicating difficulty in sustaining operations without external financing.

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	Mar 2022	Mar 2021
Income Statement
Total Revenue	9.41B	9.09B	11.29B	11.15B	11.00B	10.11B
Gross Profit	3.48B	3.41B	4.52B	4.96B	4.93B	4.48B
EBITDA	-449.70M	-395.08M	426.36M	939.22M	1.10B	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	4.00B	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 Price51.62

Price Trends

50DMA

42.62

Positive

100DMA

40.15

Positive

200DMA

40.98

Positive

Market Momentum

MACD

1.30

Positive

RSI

61.42

Neutral

STOCH

72.35

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 51.62 is above the 20-day moving average (MA) of 49.59, above the 50-day MA of 42.62, and above the 200-day MA of 40.98, indicating a bullish trend. The MACD of 1.30 indicates Positive momentum. The RSI at 61.42 is Neutral, neither overbought nor oversold. The STOCH value of 72.35 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 (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MELI	74 Outperform	$125.33B	60.81	49.11%	―	41.92%	81.11%
ORLY	73 Outperform	$76.35B	32.83	-174.09%	―	4.90%	3.28%
AZO	68 Neutral	$61.65B	24.94	-14.95%	―	5.15%	1.99%
GPC	67 Neutral	$17.69B	20.94	19.19%	3.23%	1.99%	-32.18%
BBWI	64 Neutral	$7.01B	8.86	-52.83%	2.44%	-0.93%	-4.07%
Sector *	62 Neutral	$16.85B	11.50	-7.38%	2.96%	1.59%	-23.36%
AAP	55 Neutral	$3.09B	59.62	-23.77%	2.04%	-16.55%	-941.57%

* Consumer Cyclical Sector Average

Performance Comparison

AAP

Advance Auto Parts

51.62

-6.27

-10.83%

AZO

AutoZone

3,769.26

932.86

32.89%

GPC

Genuine Parts Company

127.41

-1.31

-1.02%

BBWI

Bath & Body Works

33.14

-3.41

-9.33%

MELI

Mercadolibre

2,514.05

830.30

49.31%

ORLY

O'Reilly Auto

91.33

23.14

33.93%

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.

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: Jun 21, 2025