{"id":85424,"date":"2023-11-16T17:31:50","date_gmt":"2023-11-16T22:31:50","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/advance-auto-stock-slides-again-why-it-could-see-a-turnaround\/"},"modified":"2023-11-16T17:31:52","modified_gmt":"2023-11-16T22:31:52","slug":"advance-auto-stock-slides-again-why-it-could-see-a-turnaround","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=85424","title":{"rendered":"Advance Auto Stock Slides Again. Why It Could See a Turnaround."},"content":{"rendered":"
\n
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<\/p>\n<\/figure><\/div>\n

It has been a good year for auto parts retailers\u2014other than
\n Advance Auto Parts.<\/span>
\n Another \u201ckitchen sink\u201d quarter for the company has dragged its shares lower yet again.<\/p>\n

That makes it hard to know if this is the point where the shares finally pull a U-turn\u2014or hit a dead end.<\/p>\n

\n

Advance Auto\u2019s (ticker: AAP) third-quarter report, delivered Wednesday, was filled to the brim. It delivered a surprise loss, and the company slashed its full-year earnings guidance by roughly two-thirds, well below analysts\u2019 estimates\u2014partly due to nonrecurring charges in the quarter. It also introduced a cost-savings strategy, named a new chief financial officer, and said it\u2019s hoping to sell its wholesale distributor Worldpac and its Canadian businesses.<\/p>\n

The stock slid 7% in recent Thursday trading to $51.77, piling on top of Wednesday\u2019s 4.6% decline. If the post-earnings decline seems to be a relatively tame reaction, it\u2019s likely because Advance Auto stock had already fallen more than 60% this year heading into the results. <\/p>\n

The company\u2019s turnaround, which has been under way since before the pandemic, has seen roadblocks. In May, Advance Auto stock tumbled some 30%\u2014its largest one-day percentage decline on record\u2014after its first-quarter results and full-year guidance missed expectations, and the company cut its dividend.<\/p>\n

Investors hoping Advance Auto\u2019s big guidance reductions were in the rearview mirror were disappointed again this week. The company\u2019s woes are also thrown into a harsher light by the relatively benign macroeconomic backdrop for the industry in recent years: High vehicle costs and an aged American fleet have led to more people repairing their cars. Shares of peers
\n AutoZone
\n (AZO) and
\n O\u2019Reilly Automotive
\n (ORLY) are up roughly 10% and 16% this year, respectively.<\/p>\n

Little wonder then that Advance Auto was hit with another downgrade after the results. BofA Securities analyst Elizabeth Suzuki cut her rating on the stock to Underperform from Neutral, and lowered her price target to $43 from $60. <\/p>\n

There\u2019s \u201ca lot of wood to chop before [the] stock looks attractive,\u201d she wrote in a note dated Wednesday. <\/p>\n

Advance Auto\u2019s \u201ctransformation is going to be messy and free cash flow will likely remain under pressure for at least the next twelve months,\u201d she added.<\/p>\n

Only one out of the 27 analysts tracked by FactSet is bullish on Advance Auto, while the average target price has fallen by more than half since May, to less than $60.<\/p>\n

Of course, it\u2019s always darkest before the dawn, and, after such a massive decline, the shares trade at just over 13 times forward earnings, naturally attracting bargain hunters.<\/p>\n

But those investors will want to kick the tires for sure. Truist Securities analyst Scot Ciccarelli notes that the company\u2019s issues\u2014including its declining profitability and financial strain\u2014are \u201cway too much for our taste,\u201d particularly as retail turnarounds tend to be \u201cnotoriously difficult.\u201d<\/p>\n

Still, the stock\u2019s relatively mild reaction Wednesday could be an encouraging sign that the biggest declines are behind it. <\/p>\n

After all, the Worldpac acquisition, announced in 2013, never really jelled with the company in a way that investors hoped, so it likely won\u2019t be missed much . In addition, the lowered profit outlook does include one-time items. And a new management team\u2014Chief Executive Shane O\u2019Kelly is a
\n Home Depot
\n (HD) alum who just joined this summer\u2014needs to make moves quickly, so the new CFO and strategic changes are likely welcome, too.<\/p>\n

\u201cAdvance Auto\u00a0is quickly making bold pivots and refocusing its strategy,\u201d writes TD Cowen analyst Max Rakhlenko. Likewise, Raymond James\u2019s Bobby Griffin says the company is \u201claying the groundwork for [the] road to recovery.\u201d<\/p>\n

Tellingly, however, both analysts remain sidelined on the stock.<\/p>\n

Ultimately, Advance Auto needs to make big changes and reinvigorate its turnaround, so strategic shifts are welcome\u2014as long as profit forecasts don\u2019t continue to shrink dramatically. The question of whether or not this is the stock\u2019s low-water mark remains an open one, however.<\/p>\n

At some point it may be clearer that the worst is truly over. For now, that timeless car-buying advice seems relevant: Caveat emptor.<\/p>\n

Write to Teresa Rivas at teresa.rivas@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

It has been a good year for auto parts retailers\u2014other than Advance Auto Parts. Another \u201ckitchen sink\u201d quarter for the company has dragged its shares lower yet again. That makes it hard to know if this is the point where the shares finally pull a U-turn\u2014or hit a dead end. Advance Auto\u2019s (ticker: AAP) third-quarter […]<\/p>\n","protected":false},"author":1,"featured_media":85425,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-85424","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nAdvance Auto Stock Slides Again. Why It Could See a Turnaround. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"It has been a good year for auto parts retailers\u2014other than Advance Auto Parts. 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