Advance Auto Parts (AAP) Volatility Tied to Competitor Geographic Commentary, Sterne Agee CRT Says

Sterne Agee CRT analyst Ali Faghri believes today's volatility in Advance Auto Parts (NYSE: AAP) is related to geographic commentary from GPC and ORLY during Q1 earnings calls last week on AAP's two largest markets (Northeast and Southeast).

"During its Q1 earnings call last week, GPC management cited business disruptions from unfavorable winter weather in the Northeast, where AAP has about 20% of its stores," Faghri commented. "Additionally, ORLY highlighted the Southeast as an area of strength in response to a question, sparking fear that AAP is losing share to ORLY in its largest market (over 40% of stores). While we are mindful of increased risk for AAP based on this commentary, both GPC and ORLY pointed to an acceleration in sales trends to end March with a strong start to April. AAP has the benefit of a 16-week first quarter (ending 4-25), which should help offset some of the negative impact of weather-related disruptions. Also, while we agree that ORLY is a net market share gainer (it has been for some time), the industry is very fragmented with the top 4 retailers only controlling about 40% of the market. In our view, ORLY's market share is coming from a combination of both public and private competitors."

The firm reiterated a Buy rating and price target of $165 on AAP.

For an analyst ratings summary and ratings history on Advance Auto Parts click here. For more ratings news on Advance Auto Parts click here.

Shares of Advance Auto Parts closed at $148.61 yesterday.

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