Savvy Trades and Investments

[Bobwins]

AAP Advance Auto Parts +1.64 to $68.54 Bought some 1 year leaps on AAP at $75 strike for $9.40 on Tuesday. Huge selloff on earnings due to mediocre earnings and lowering guidance BUT really it was dropping dividend from 1.50/qtr to .25/qtr. Institutions, mutual funds and etf's chasing dividends were most of investors in AAP. They fled and dropped price from $120's to $63.54 on Monday.

Advance Auto Parts competes against big players like Autozone. AAP has ~5,000 stores. Q1 showed loss of momentum on sales and loss of gross margins. Still made a profit of .72 but only about 1/2 of guidance. Dropped guidance for 2023 eps to 6 to 6.50 with flat sales.

Competitive old line business so have had to adjust pricing and are focused on regaining business with auto repair shops by increasing inventory availability. Apparently professional auto repair shops are not as price sensitive when parts availability is dependable and good. This increase in inventory has led to an increase in accts payables and but company says inventory increases are almost done. Q2 will be similarly ugly but says 2nd half will improve slightly. So no miracle recovery but this company is about a 4 billion market cap business that was founded in 1932. Has CarQuest private label products and services the reliable auto repair segment. During a downturn, DIY auto repairs increase. I bought leaps to give me time to see if AAP can recover a bit.