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Advance Auto Parts Inc AAP

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Solid Quarter Reflects Strong Market and Advance Auto Parts' Improving Position; Shares Trade Fairly

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

In light of third-quarter results, our $215 fair value estimate for narrow-moat Advance Auto Parts should rise by a mid-single-digit percentage. Advance maintained its strength as the professional segment continued its momentum, with 3% comparable growth overall leading to 13% two-year stacked expansion that was in line with the second-quarter mark. This near-term performance suggests the firm is slightly ahead of our 2021 expectations, but we plan to maintain our long-term targets of mid-single-digit top-line growth against low-double-digit operating margins over the next decade.

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Company Profile

Business Description

Advance Auto Parts is one of the industry’s largest retailers of aftermarket automotive parts, tools, and accessories to do-it-yourself customers in North America. Advance operated 4,976 stores as of the end of 2020, in addition to servicing 1,277 independently owned Carquest stores. The company’s Worldpac unit is a premier distributor of imported original-equipment parts. Advance derived 57% of its 2020 sales from commercial clients, up from 30%-40% before the General Parts deal.

2635 East Millbrook Road
Raleigh, NC, 27604
T +1 540 362-4911
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 28, 2020
Stock Type Cyclical
Employees 68,000