Advance Auto Parts, Inc.
Thesis
We recommend a long on Advance Auto Parts with a price target of $280, offering 75%+ upside from today’s price of $161. We believe EPS can double to ~$16 over the next four to five years via multiple operational improvements, and at 18x forward EPS, AAP is worth $280 in 2019.
Did it work?
failed
confidence: high
The thesis called for AAP to reach $280 by 2019 on EPS doubling to ~$16, but instead the stock declined 73.4% over the 112 months since the pitch — the opposite direction and far short of the 75%+ upside targeted. The stated 4-5 year horizon has long since elapsed, and the operational improvements underpinning the EPS-doubling case clearly did not materialize, with the business deteriorating rather than compounding. This is a decisive failure of the thesis.