We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Advance Auto Parts (AAP - Free Report) is a Zacks Rank #5 (Strong Sell) that 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 is a leading automotive parts provider in North America, serving the “do-it-yourself” or “DIY customers.
After seeing strong earnings during the pandemic, AAP hit all-time highs in early 2022. However, the stock has sold off 73% since those $244 highs and sits at $66 after a 40% drop in June.
While some might be looking to buy after this recent drop, it might take a while to see a bounce. An earnings miss and cascading estimates will likely keep the stock suppressed unless the company can turn the momentum.
About the Company
Advanced Auto Parts is headquartered in Raleigh, NC.The company was founded in 1929 and employs 40,000.
The company operates under four store names: Advance Auto Parts, Carquest, Worldpac, and Autopart International.
AAP is valued at $4 billion and has a Forward PE of 11. The stock holds Zacks Style Scores of “B” in Value, but “F” in Growth and Momentum. The stock pays a dividend of 1.5%.
Q1 Earnings
In late May Advance Auto reported Q1 earnings, missing expectations by 72%. The company missed on revenues, cut its outlook, and slashed the dividend 83%. FY23 was cut to $6.00-6.50 v the $10.63 expected.
Operating margins were 2.6%, down from 6% a year ago. Management blamed this drop on “higher than planned investments to narrow competitive price gaps in the professional sales channel as well as unfavorable product mix.”
The combination of weak guidance and the dividend cut brought in the sellers. And since earnings the stock fell even lower as analyst estimates continue to drop.
Estimates
Over the last 30 days, analysts have cut estimates for all time-frames.
For the current quarter, analysts have dropped their numbers from $2.89 to $1.59 $0.87, or 45%.
For the next quarter, analysts lowered estimates from $2.82 to $2.01, or 29%.
Longer term, numbers are falling as well. Next year’s estimates have gone from $11.53-6.95 or 40%.
Technical Take
The stock has taken out the COVID lows and has fallen to levels not seen since 2012. When a stock takes out decade lows, it typically means investors have given up on the name.
While there might be a bounce at some point, investors that have been stuck long likely look to get out on any bounce. Looking at moving averages, the 21-day is at $76, while the 50-day is at $103.
While it might be tempting to buy at current levels and look for a run into those MA resistance levels, there is still a possibility of more downside.
The 2012 lows are $60, while the $2010 lows and big long-term support are at $40. New buyers can likely be patient and wait for those levels if they are interested in the name.
In Summary
When a stock makes decade lows, investors are running to get out. While it might be tempting to buy the large sell-off, the risk-reward is unknown when a stock is falling like a waterfall.
If investors are interested in AAP, they can be patient and wait for price to come to them, or look for the earnings story to turn around.
For those interested in the sector, a better option might be O’Reilly Automotive (ORLY - Free Report) . The stock is a Zacks Rank #2 (BUY) and is trading near all-time highs.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Bear of the Day: Advance Auto Parts (AAP)
Advance Auto Parts (AAP - Free Report) is a Zacks Rank #5 (Strong Sell) that 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 is a leading automotive parts provider in North America, serving the “do-it-yourself” or “DIY customers.
After seeing strong earnings during the pandemic, AAP hit all-time highs in early 2022. However, the stock has sold off 73% since those $244 highs and sits at $66 after a 40% drop in June.
While some might be looking to buy after this recent drop, it might take a while to see a bounce. An earnings miss and cascading estimates will likely keep the stock suppressed unless the company can turn the momentum.
About the Company
Advanced Auto Parts is headquartered in Raleigh, NC.The company was founded in 1929 and employs 40,000.
The company operates under four store names: Advance Auto Parts, Carquest, Worldpac, and Autopart International.
AAP is valued at $4 billion and has a Forward PE of 11. The stock holds Zacks Style Scores of “B” in Value, but “F” in Growth and Momentum. The stock pays a dividend of 1.5%.
Q1 Earnings
In late May Advance Auto reported Q1 earnings, missing expectations by 72%. The company missed on revenues, cut its outlook, and slashed the dividend 83%. FY23 was cut to $6.00-6.50 v the $10.63 expected.
Operating margins were 2.6%, down from 6% a year ago. Management blamed this drop on “higher than planned investments to narrow competitive price gaps in the professional sales channel as well as unfavorable product mix.”
The combination of weak guidance and the dividend cut brought in the sellers. And since earnings the stock fell even lower as analyst estimates continue to drop.
Estimates
Over the last 30 days, analysts have cut estimates for all time-frames.
For the current quarter, analysts have dropped their numbers from $2.89 to $1.59 $0.87, or 45%.
For the next quarter, analysts lowered estimates from $2.82 to $2.01, or 29%.
Longer term, numbers are falling as well. Next year’s estimates have gone from $11.53-6.95 or 40%.
Technical Take
The stock has taken out the COVID lows and has fallen to levels not seen since 2012. When a stock takes out decade lows, it typically means investors have given up on the name.
While there might be a bounce at some point, investors that have been stuck long likely look to get out on any bounce. Looking at moving averages, the 21-day is at $76, while the 50-day is at $103.
While it might be tempting to buy at current levels and look for a run into those MA resistance levels, there is still a possibility of more downside.
The 2012 lows are $60, while the $2010 lows and big long-term support are at $40. New buyers can likely be patient and wait for those levels if they are interested in the name.
In Summary
When a stock makes decade lows, investors are running to get out. While it might be tempting to buy the large sell-off, the risk-reward is unknown when a stock is falling like a waterfall.
If investors are interested in AAP, they can be patient and wait for price to come to them, or look for the earnings story to turn around.
For those interested in the sector, a better option might be O’Reilly Automotive (ORLY - Free Report) . The stock is a Zacks Rank #2 (BUY) and is trading near all-time highs.