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Barclays upgraded Advance Auto Parts (NYSE:AAP) to Equal Weight from Underweight, cutting the price target on the stock to $129 from $140 in a note to clients Friday, following the stock’s “significant underperformance” so far in 2023.
Analysts believe the more than 18% fall in AAP’s share price this year has skewed the risk/reward, but they remain cautious about the company’s fundamentals.
“Even as we remain cautious on the company’s fundamentals, AAP’s stock has meaningfully underperformed over the past 2 months, -24% vs. ORLY +4%, AZO -4% and the S&P 500 -2%, skewing the risk/reward of staying Underweight,” wrote analysts. “Further, rarely have we seen a company struggle for so long in such a healthy category.”
Barclays believes the core issue at AAP remains its lower sales productivity, which also “limits the margin story.”
“While the current management team seems to have been focused on the right areas to address this issue, we just think the legacy issues were deeper, and there are structural gaps here,” the analysts added. ” AAP has also underperformed in DIFM, with its total DIFM sales only growing at a low-teens rate since 2019 vs. AZO +65% and ORLY +41%.”
