Advance Auto Parts stock extends record plunge after BofA abandons longtime bullish call

By Tomi Kilgore

Advance Auto Parts' woes are a result of 'idiosyncratic mis-execution,' BofA analyst says

Shares of Advance Auto Parts Inc. took another dive Thursday, to extend the previous session's record plunge, after BofA Securities analyst Elizabeth Suzuki abandoned her longtime bullish stance following the auto parts seller's disappointing quarterly results and outlook.

Suzuki cut her rating to neutral, after being at buy for the past three years, as the company's "turnaround efforts appear to be faltering."

She also slashed her stock-price target by more than half, to $85 from $178.

The stock (AAP) sank 6.7% to $68.03, putting it on track for the lowest close since Oct. 25, 2012.

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On Wednesday, the stock fell a record 35% after the company reported a big profit miss amid sharp margin pressure, cut its full-year outlook as those pressures are expected to continue and chopped its dividend by 83%.

"These actions will suppress medium-term growth and appeal to investors," Suzuki wrote in a note to clients.

She said what's also weighing on sentiment is that the company still hasn't announced a new chief executive officer to replace Tom Greco, who announced in February plans to retire at the end of the year.

The stock has plummeted 50.6% over the past three months, enough to make it the worst performer in the S&P 500 index over that period.

If there's a bright side for investors, Suzuki doesn't believe Advance Auto's troubles reflect broad-sweeping challenges across the auto-parts industry.

"Rather we view [Advance Auto's] miss as idiosyncratic mis-execution," Suzuki wrote.

If fact, she turned bullish on rival Genuine Parts Co. (GPC), as she raised her rating to buy from neutral, and nudged up her stock-price target to $189 from $185, for two reasons:

"First, it is the only company among its peers with exposure to new vehicle production," Suzuki wrote. "Second, it has an opportunity to benefit from a favorable automation capex cycle."

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The stock tacked on 0.2% to close Thursday at $149.22.

For O'Reilly Automotive Inc. (ORLY), she reiterated the buy rating she's had on the stock for the past year and the $990 stock-price target, as the company continues to gain market share in both the do-it-yourself (DIY) and do-it-for-me (DIFM) categories.

"Over the last 10 years, [O'Reilly] has been the most consistent outperformer, with same-store sales...growth exceeding the peer average each and every year," Suzuki wrote.

O'Reilly shares slipped 0.9% on Thursday.

Meanwhile, Suzuki backed away from the bearish call she's had on AutoZone Inc. (AZO) for the past two years, and raised the price target to $2,465 from $2,120.

She said the upgrade comes a little over a week after the company's disappointing fiscal third-quarter report triggered a pullback in the stock.

AutoZone's stock, which gave up 0.6% on Thursday, has dropped 9.4% since the company reported results.

"While [AutoZone's] sales growth may have missed the company's own expectations and those of investors, it did still appear to outperform the industry," Suzuki wrote.

She added that the company's higher mix of DIY customers -- more than 70% of sales -- relative to its peers "give it higher exposure to low-income consumers who generally repair their cars themselves out of economic necessity."

-Tomi Kilgore

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06-02-23 0744ET

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