Now that Goldman Sachs has warned investors about potential risks in the broader S&P 500 Index, investors would be wise to start looking for opportunities that offer less downside risk in 2025 but still have double-digit upside potential. Today, investors can identify one clear theme through in-depth analysis of the retail sector and, more importantly, trends in retail sales data..
Advanced Auto Parts Today
Advanced auto parts
- 52 week range
- $35.59
▼
$88.56
- Dividend yield
- 2.18%
- P/E ratio
- 62.91
- Target price
- $47.93
This theme can be traced back to one stock, where investors can eliminate downside risk given how cheap it is trading today compared to its 52-week high, while still remaining in 2025 with enough upside potential to leave its peers behind. Through this analysis, investors will also learn why institutional investors decided to increase their stakes in this company by connecting the technical and fundamental stories.
Company name Advance Auto Parts Inc. New York Stock Exchange: AARPIn both the retail and transportation sectors, the recent fall and rise in stock prices can be attributed to last month’s favorable retail sales report, indicating continued demand for auto parts and maintenance-related services. Before investors can justify the growth potential of this stock, they must first understand what’s going on behind the scenes. Here.
What the Retail Sales Report Says
In November 2024, the Automotive and Parts Dealer industry increased its net growth to 2.6%, leading all other industries. The same can be said for the previous two months, which means that most of the retail demand is directed towards this segment and this market, and there could be several reasons for this.
With auto loan interest rates still near cyclical highs, as are new car prices, there appears to be very little demand for new cars lately. Investors can see this trend in action by watching the recent declines in stocks such as CarMax Inc. New York Stock Exchange: KMX or Cars.com Inc. New York Stock Exchange: CARS over the past month, indicating increased market risk perception due to the report.
On the other hand, Advance Auto Parts sales rose a whopping 16.3% in the latest quarter, going hand-in-hand with the growth in auto and parts sales dealers reported during the same period. That theme was enough to make the market bullish on Advance Auto Parts stock again, causing it to outperform the S&P 500 by more than 16% this quarter.
However, shares are still trading low today, just 51% off their 52-week high, meaning the ceiling is much higher than today’s levels and the broader market (and Wall Street analysts) are doing just fine they understand this.
Market view of leading auto parts inventories
There’s a reason the market is willing to pay a price-to-earnings (P/E) ratio of up to 61.5x for Advance Auto Parts stock today. This is a huge premium compared to the Auto Parts Store industry, which has an average valuation of 25.8x.
Preliminary forecast of auto parts inventories today
$47.93
Growth potential 4.37%Hold
Based on ratings from 16 analysts
| High forecast | $60.00 |
|---|---|
| Average forecast | $47.93 |
| Low forecast | $38.00 |
Details of the preliminary forecast of auto parts inventories
Some may call it expensive today, but others will understand that the market will always pay a higher valuation for stocks that it believes will outperform its peers in the near future. At this point, Wall Street analysts have provided the market with ample evidence to support this, as evidenced by earnings per share (EPS) forecasts.
Although the company reported a net loss per share of $0.04 last quarter, Wall Street analysts believe earnings per share could approach $0.95 in the same quarter next year, which would be a huge increase from where the stock is at today. . Considering that low demand for new cars can lead to the need for used car servicing, this makes sense.
Amid this EPS growth, Barclays has decided to maintain its stock price for Advance Auto Parts at $54 per share for January 2025. To prove this estimate correct, the stock would have to rise to 20.3% from its original level. is trading today, offering investors a favorable risk-reward profile today.
But these analysts weren’t the only ones expressing optimism about the stock. Some institutional buyers who also see this happening have decided to buy some more shares recently, such as Pzena Investment Management investors, who increased their holdings in Advance Auto Parts shares by 140.3% as of November 2024.
This new distribution brings their total position to a high of $113.4 million to date, or 4.8% ownership in the company, giving retail investors another bullish indicator to consider when developing their potential buying thesis.
Before you consider Advance Auto Parts, you need to hear this.
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