Advance Auto Parts, Inc. (AAP): A Bull Case Theory

We came across a bullish thesis on Advance Auto Parts, Inc. on DeepValue Capital’s Substack. In this article, we will summarize the bulls’ thesis on AAP. Advance Auto Parts, Inc.'s share was trading at $52.69 as of December 2nd. AAP’s trailing and forward P/E were 174.78 and 20.75 respectively according to Yahoo Finance.

Advance Auto Parts (AAP) is one of North America’s largest aftermarket auto parts retailers, operating over 4,000 company-owned Advance and Carquest stores and supplying more than 800 independently owned Carquest locations. Its network spans the U.S., Canada, Puerto Rico, the Caribbean, and Mexico, with sales evenly split between professional installers and DIY customers. Over 90% of its revenue is non-discretionary, anchored by steady demand for essential vehicle maintenance and repair parts.

Founded in 1932 by Arthur Taubman, the company expanded through decades of disciplined acquisitions, culminating in its 2013 purchase of General Parts International—owner of Carquest and Worldpac—which created its “blended box” model serving both retail and professional clients. Despite this foundation, years of weak execution, supply chain inefficiencies, and missed opportunities left AAP trailing peers like AutoZone and O’Reilly.

By 2023, performance challenges and margin pressure demanded change. Shane O’Kelly, appointed CEO in late 2023, brought deep distribution and operational expertise, immediately streamlining the supply network and refocusing on core profitability. Activist investors Third Point and Saddle Point joined the board in 2024, accelerating the turnaround by driving cost efficiencies and strategic discipline. The company is consolidating distribution centers, expanding market hubs, and improving working capital efficiency—all aimed at restoring sustainable margin growth.

With operational execution now improving and industry tailwinds supporting consistent demand, AAP’s transformation under O’Kelly positions it for meaningful recovery. The thesis anticipates a return to profitability and valuation expansion, with potential for shares to exceed $100 within three years—more than double current levels.

Previously we covered a bullish thesis on Advance Auto Parts, Inc. (AAP) by Stock Analysis Compilation in December 2024, which highlighted CEO Shane O’Kelly’s turnaround strategy and the WorldPac divestiture to strengthen financials. The stock has appreciated about 25.57% since our coverage as the thesis began to play out. The thesis still stands, and DeepValue Capital shares a similar view but emphasizes activist involvement and valuation rerating potential.

Advance Auto Parts, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 34 hedge fund portfolios held AAP at the end of the second quarter which was 33 in the previous quarter. While we acknowledge the potential of AAP as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.