With car shopping over the last three years turning out to be something of a mess, it’s not surprising that people would instead choose to fix their old cars rather than find a new one. Advance Auto Parts (NYSE:AAP) benefited from that trend significantly, but it just got a fresh draft upward thanks to word that an activist investor may be considering buying in.
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A report from Activist Insight noted that Advance Auto Parts, the nationwide auto parts chain, could be an activist target. This isn’t based on rumor or thirdhand gossip about some specific investor looking to get involved. Rather, it’s based on the Insightia Vulnerability scale, which places Advance Auto Parts in the 97th percentile of stocks that might see an activist investor step in. This is especially likely over the short term, as well; the likelihood is strong for the next nine months.
Such an outlook isn’t a surprise. Just weeks ago, Advance Auto Parts brought out its latest earnings report and started a panic among investors that share prices dropped 35% over the next few hours. Moreover, there wasn’t much hope for improvement. A statement from Advance Auto Parts CEO Tom Greco noted that the “competitive dynamics” seen in the first quarter would continue, and that would cut overall 2023 expectations short. That not only prompted a cut in full-year guidance but also a cut in the dividend, which probably partially prompted the rapid departure of investors.
Analysts, meanwhile, are just short of pessimistic. With two Buy ratings and 16 Holds, Advance Auto Parts stock is considered a Hold by analyst consensus. However, those who take the plunge anyway can get in on 12.17% upside potential thanks to its average price target of $77.63 per share.
