Advance Auto Parts (AAP) announced earlier today that it will be shutting down over 700 stores as demand for its products weakens. This includes over 500 company-owned stores, four distribution centers, and 204 independent locations as part of a restructuring plan to improve its struggling business. This news, combined with an underwhelming third quarter that saw AAP’s earnings per share come in at -$0.10 versus the consensus estimate of $0.49 per share, led to a price cut from Truist.
Indeed, five-star analyst Scot Ciccarelli maintained a Hold rating on the stock but lowered the price target from $41 to $39 per share. He noted that Q4 profit forecasts were much lower than estimates. In addition, although Ciccarelli likes the fact that management is trying to turn things around, he also noted that closing that many stores would be a bullish catalyst for competitors.
This makes sense since it would effectively lower Advance Auto Parts’ market share as it tries to shrink itself to profitability. It’s worth noting that, so far, Ciccarelli has enjoyed a 73% success rate on his ratings, with an average return of 17.9% per rating.
Is AAP Stock a Buy?
Overall, analysts have a Hold consensus rating on AAP stock based on two Buys, 14 Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 25% decline in its share price over the past year, the average AAP price target of $53.86 per share implies 30.7% upside potential.
