Advance Auto Parts (AAP) PT Raised to $60 at Citi

Citi analyst Steven Zaccone raised the price target on Advance Auto Parts (NYSE: AAP) to $60.00 (from $49.00) while maintaining a Neutral rating.

The analyst comments "AAP announced its intention to issue $1.5B of new debt and enter into a new ABL facility to proactively support the health of its supply chain financing program. In simple terms, AAP has fallen out of investment grade status and to ensure continued partnership with vendors, AAP needs to have a stable supply chain financing program. The proposed debt offering will improve AAP’s liquidity position. The downside is the cost of capital is high and will likely be dilutive to EPS (exact details will be provided on 8/14 earnings). We connected with management yesterday. In our view, the answer to why now? is unclear, but this move seems like a wise decision to eliminate supply chain financing risk and heighten focus on the business turnaround. AAP also pre-announced 2Q results yesterday toward the high-end of internal expectations, but these results were below market expectations in light of ORLY’s results."

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