GPC - Advance Auto Parts falls further after Wall Street downgrades pour in

2023-06-01 10:49:08 ET

Advance Auto Part ( NYSE: AAP ) dropped another 5.19% in early trading on Thursday on Thursday as investors continue to digest the auto retailer's guidance cut and dividend slash rattled investors. The sell-off in AAP pushed shares to their lowest level in more than three years and swapped hands as low as $67.80 per share.

On Wall Street, Goldman Sachs downgraded Advance Auto Parts ( AAP ) to Neutral from Buy after the earnings misfire. The firm pointed to concerns regarding near-term execution and share loss in the company's do-it-for-me business, ongoing margin erosion. A lack of a clear near-term catalyst for AAP to drive a multiple re-rating was also a factor.

Bank of America also cut Advance Auto Parts ( AAP ) to Neutral from Buy with the turnaround efforts said to be faltering. In addition to the reeled in expectations for sales, margins, and store growth, BofA pointed out that AAP still has not announced a new CEO to replace Tom Greco who is retiring, which is seen leaving too many questions up in the air regarding strategy.

Elsewhere, Raymond James dropped AAP to a Market Perform rating from Strong Buy and JPMorgan cut the stock to a Neutral rating from Overweight.

While those bullish sell-side firms missed calling the AAP collapse, Seeking Alpha Investing Group Leader Cory Cramer tagged the stock with a Sell rating in March.

In looking at the broad auto retail sector, BofA saw enough upside on Genuine Parts ( GPC ) to warrant an upgrade to a Buy rating from Neutral and price target lift to $189.

"Among the big 4 auto parts retailers GPC has a unique opportunity to capitalize on two growth trends within its Industrial segment (Motion). First, it is the only company among its peers with exposure to new vehicle production. Second, it has an opportunity to benefit from a favorable automation capex cycle."

BofA also turned more constructive on AutoZone ( AZO ) with a boost to a Neutral rating from Underperform. The firm noted AutoZone racked up about 400 basis points of market share in its addressable market during Q1 , consistent with prior quarters and margins are said to be a on a more favorable path.

More on auto retail:

• Advance Auto Parts earnings lowlights
• Genuine Parts Company earnings call transcript
• Dig into the Seeking Alpha Quant Rating across the auto retailer sector

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