Row 97522

Row ID: 97522 | Dataset Entry | Axioma AXP Content Repository

Content Data

This page contains data entry 97522 from the Axioma AXP content repository. The structured data below represents the complete record for this entry.

Advance Auto Parts shares collapsed during 2022-23 falling from $240 to a low of $50 per share. Currently trading at $69. My target price is 140$.

# What happened?

Basically due to bad CEO decisions operating margin decreased from 7,5% to around 1,5%. This was caused by a mess in the company supply chain, an increase in the SG&A costs and store comparable sales metric stopped growing.

# What are the good news?

The necessary steps to fix this situation have been taken:

1. Former CEO was fired,  and in Q3 2023 Shane O’Kelly was appointed as new CEO. Prior to that, O’Kelly worked as CEO of Home Depot Supply, a subsidiary of Home Depot. This is the kind of CEO we need to fix the supply chain issues. Also he has brought with him a new CFO and some other management leaders.  2. Operating margins are going to increase. Not to the prior 7,5%, but management is guiding at least 3,2% in 2024. New CEO laid off 400 people in his first week and is cutting $200M in SG&A annually.  The AAP Canada business is on sale and he is also selling another part of the business called WorldPac. Proceeds from these sales are going to retire all debt and save additional 90$ in interest expenses annually. Also concentrating business in the US will boost margins.  3. An activist investor, (Dan Loeb) has taken a stake in the company and has appointed 3 board members with experience in the auto parts industry ( prior board members lacked this experience). Also legendary Michael Burry also took a position in the company.

[https://www.cnbc.com/2024/04/13/how-third-point-and-saddle-point-may-help-boost-margins-at-advance-auto-parts.htmlFrom](https://www.cnbc.com/2024/04/13/how-third-point-and-saddle-point-may-help-boost-margins-at-advance-auto-parts.htmlFrom)

A macro perspective shows the stock fundamentals are solid as the US consumer is hurt and new vehicles sales are being impacted leading to a higher maintenance cost from older vehicles.

Also US elections are going to take place in November and it is safe to assume that the worst case scenario is that the stock market won’t crash. A FED rate cut in September can also help.

# Upcoming catalysts?

It reports earnings on 29th May and if it reaffirms the guidance they gave in February and some of the steps management is taking materializes, then stock can fly to more than 100$ per share.

# What I have done?

Although I think the stock will rise on next week earnings release, I think it is better to buy long dated call options. I bought 100 calls of the longest dated option which is January 2026. Strike 90$ at 11.25$ for a total cost of $100k dollars. Leverage 9 to 1.

**TLDR**: I'm long $100k on long dated out of the money $AAP calls.

https://preview.redd.it/q2k1duxeel2d1.png?width=1603&format=png&auto=webp&s=819efb879c8c33c43cc9405d046873c515752881

FieldValue
text Advance Auto Parts shares collapsed during 2022-23 falling from $240 to a low of $50 per share. Currently trading at $69. My target price is 140$.  # What happened? Basically due to bad CEO decisions operating margin decreased from 7,5% to around 1,5%. This was caused by a mess in the company supply chain, an increase in the SG&A costs and store comparable sales metric stopped growing.  # What are the good news? The necessary steps to fix this situation have been taken: 1. Former CEO was fi…
label r/wallstreetbets
dataType post
communityName r/wallstreetbets
datetime 2024-05-25
username_encoded Z0FBQUFBQm5Lak12VmhzNjFTTm1VelFHckVXbkRnQ2VZYThJQ2lhbTBKX0FjcDNuNGxBS0JkT2NNUXJKZS1pMlVIS05UaHBldHROWDN3STJRN0xNREdOVTRYeExqaFhrUlE9PQ==
url_encoded Z0FBQUFBQm5LalBCNDZwRi1adGVGd3ViRHd2Tmh3eWhZMW8xSWEtT3JwQnJaa0IxbXlTTlJ6Tkk1T3ZpNFc2dE9oQlJxOG9kUE9WZEJNbUJMU1VqdUU5VUFIMWJKcHdueFJTT2JNTVIyc0d1bURzU0VhOWtJaGxJUjV6eFZ5SWg1bkZVeXJFRl9hVU1yak54eC1XeGpnMzdJcnRpQm5fQzV0MV8wN05MQVZETjRrWnBKREI2Tlo2ZmZ0NDBhQzBVZTY4YndBZnR2LUx2dlktMk9JbzZjblJ4dHdmcmx5YkZtUT09

Raw Record

{
  "text": "Advance Auto Parts shares collapsed during 2022-23 falling from $240 to a low of $50 per share. Currently trading at $69. My target price is 140$. \n\n# What happened?\n\nBasically due to bad CEO decisions operating margin decreased from 7,5% to around 1,5%. This was caused by a mess in the company supply chain, an increase in the SG&A costs and store comparable sales metric stopped growing. \n\n# What are the good news?\n\nThe necessary steps to fix this situation have been taken:\n\n1. Former CEO was fired,  and in Q3 2023 Shane O’Kelly was appointed as new CEO. Prior to that, O’Kelly worked as CEO of Home Depot Supply, a subsidiary of Home Depot. This is the kind of CEO we need to fix the supply chain issues. Also he has brought with him a new CFO and some other management leaders. \n2. Operating margins are going to increase. Not to the prior 7,5%, but management is guiding at least 3,2% in 2024. New CEO laid off 400 people in his first week and is cutting $200M in SG&A annually.  The AAP Canada business is on sale and he is also selling another part of the business called WorldPac. Proceeds from these sales are going to retire all debt and save additional 90$ in interest expenses annually. Also concentrating business in the US will boost margins. \n3. An activist investor, (Dan Loeb) has taken a stake in the company and has appointed 3 board members with experience in the auto parts industry ( prior board members lacked this experience). Also legendary Michael Burry also took a position in the company. \n\n[https://www.cnbc.com/2024/04/13/how-third-point-and-saddle-point-may-help-boost-margins-at-advance-auto-parts.htmlFrom](https://www.cnbc.com/2024/04/13/how-third-point-and-saddle-point-may-help-boost-margins-at-advance-auto-parts.htmlFrom)\n\nA macro perspective shows the stock fundamentals are solid as the US consumer is hurt and new vehicles sales are being impacted leading to a higher maintenance cost from older vehicles. \n\nAlso US elections are going to take place in November and it is safe to assume that the worst case scenario is that the stock market won’t crash. A FED rate cut in September can also help.\n\n# Upcoming catalysts? \n\nIt reports earnings on 29th May and if it reaffirms the guidance they gave in February and some of the steps management is taking materializes, then stock can fly to more than 100$ per share. \n\n# What I have done?\n\nAlthough I think the stock will rise on next week earnings release, I think it is better to buy long dated call options. I bought 100 calls of the longest dated option which is January 2026. Strike 90$ at 11.25$ for a total cost of $100k dollars. Leverage 9 to 1. \n\n**TLDR**: I'm long $100k on long dated out of the money $AAP calls.\n\nhttps://preview.redd.it/q2k1duxeel2d1.png?width=1603&format=png&auto=webp&s=819efb879c8c33c43cc9405d046873c515752881\n\n",
  "label": "r/wallstreetbets",
  "dataType": "post",
  "communityName": "r/wallstreetbets",
  "datetime": "2024-05-25",
  "username_encoded": "Z0FBQUFBQm5Lak12VmhzNjFTTm1VelFHckVXbkRnQ2VZYThJQ2lhbTBKX0FjcDNuNGxBS0JkT2NNUXJKZS1pMlVIS05UaHBldHROWDN3STJRN0xNREdOVTRYeExqaFhrUlE9PQ==",
  "url_encoded": "Z0FBQUFBQm5LalBCNDZwRi1adGVGd3ViRHd2Tmh3eWhZMW8xSWEtT3JwQnJaa0IxbXlTTlJ6Tkk1T3ZpNFc2dE9oQlJxOG9kUE9WZEJNbUJMU1VqdUU5VUFIMWJKcHdueFJTT2JNTVIyc0d1bURzU0VhOWtJaGxJUjV6eFZ5SWg1bkZVeXJFRl9hVU1yak54eC1XeGpnMzdJcnRpQm5fQzV0MV8wN05MQVZETjRrWnBKREI2Tlo2ZmZ0NDBhQzBVZTY4YndBZnR2LUx2dlktMk9JbzZjblJ4dHdmcmx5YkZtUT09"
}
Explore Dataset Explore Row

Entry Information