Advance Auto Parts is downgraded at Evercore with O'Reilly Automotive called the better stock option
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Evercore ISI downgraded Advance Auto Parts (NYSE:AAP) to an In Line rating on Wednesday after having it set at Outperform.
Analyst Greg Melich and team are cautious on AAP due to a reduced industry growth outlook and concerns that lingering share loss is likely to constrain AAPâs upside.
"We believe disinflation and a decelerating consumer will make comps more challenging into 2023. A slower environment is never easy on the turnaround player."
The tough macro backdrop for 2023 is seen leading to lower returns for AAP lower returns as Street numbers slip and EBIT margin goals are tougher to hit. After factoring in lower estimates for 2022-2023 EPS, Evercore cut its base case price target on AAP to $180, which works out to a 12.5X to 13X multiple. That 20% to 25% discount to the S&P is called appropriate until share stabilizes for AAP. Within the sector, Outperform-rated O'Reilly Automotive (ORLY) ORLY remains the firm's preferred auto aftermarket name for defensive growth in a volatile landscape.
Shares of AAP fell 2.71% in premarket trading on Wednesday. ORLY slipped 0.55%.
Compare growth, profitability, and valuation metrics on AAP and ORLY side by side.