ADVANCE AUTO PARTS (-) : As good as it gets

研报英文原文证据摘录

ADVANCE AUTO PARTS (-) : As good as it gets

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Investment summary

Key issue/debate

How much of the ~2,000bps of the margin gap versus AutoZone/O’Reilly is addressable

versus structural? Is AAP able to optimize its supply chain, and what will be the impact

on sales productivity and margins? Will AAP run into liquidity issues?

Recent stock performance

Year-to-date, AAP shares are +49%, versus the S&P 500’s +9%. AAP’s closest peers

AZO and ORLY are +1% and +1%, respectively. During 2025, AAP shares were -18%,

underperforming the S&P 500’s +16%.

BNP Paribas Investment Thesis

We recognize the scarcity value and potential asymmetric returns of a retailer that is able

to meaningfully improve operating margins. However, we are of the belief that AAP’s

margin gap to peers is entirely explainable via a combination of sales productivity,

customer mix, business mix, and fixed asset intensity. We believe that AAP is over-

earning versus peers, not under-earning as is widely believed by investors. Further, we

see this industry as far more consolidated than investors appreciate, and closing a

productivity gap versus peers is rare, especially while trying to address margins. We

believe AAP’s supply chain consolidation poses significant execution risk while offering

less upside to margins and productivity than investors appreciate.

BNP Paribas Estimates versus Consensus

Our 2026 and 2027 GAAP EBITDA estimates increase by 8.7% and 6.8%, respectively,

while our non-GAAP EBITDA estimates increase by 11.5% and 12.3%, respectively. We

are 9% and 24% below prior 2026 and 2027 Consensus non-GAAP EBITDA,

respectively.

BNP Paribas Valuation methodology

We arrive at our $35 TP (was $31) by applying a 6.5x EV/EBITDA (unchanged) to our