AAP - Advance Auto Parts: A Messy Q1 Adds To Credibility Challenges

2024-05-30 23:09:13 ET

Summary

• Shares of Advance Auto Parts have lost about 44% of their value over the past year.
• The company's recent earnings release contained a sloppy error in its guidance, adding to concerns about credibility given restated financials and past missteps.
• While cost control efforts and improved cash flow are positive signs, sales growth remains weak, and the balance sheet repair is likely to take several years.
• Shares are likely to be dead-money, and investors should look elsewhere for better opportunities.

Shares of Advance Auto Parts ( AAP ) have been a poor performer over the past year, losing about 44% of their value. On Wednesday, the stock plunged 11% in response to an underwhelming quarter, and it has now given back essentially all of its year-to-date gains. I last covered AAP in September , and I rated shares a “sell,” given cash flow concerns, saying shares could find a floor around $50, which has been the bottom. Since my recommendation, AAP has meaningfully underperformed the market, rising 8% vs the 17% S&P 500 gain. With new financials though, now is a good time to see if the stock is still a sell or if there is a better opportunity. I remain cautious....

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