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

Core Thesis - Advance Auto Parts, Inc. (AAP) is positioned for a significant recovery and potential valuation expansion, with shares expected to exceed $100 within three years, more than doubling from current levels [5][6]. Company Overview - AAP is one of North America's largest aftermarket auto parts retailers, operating over 4,000 company-owned stores and supplying more than 800 independently owned locations, with a revenue split between professional installers and DIY customers [2]. - Over 90% of AAP's revenue is non-discretionary, driven by steady demand for essential vehicle maintenance and repair parts [2]. Historical Context - Founded in 1932, AAP expanded through disciplined acquisitions, notably the 2013 purchase of General Parts International, which created a blended model serving both retail and professional clients [3]. - The company has faced years of weak execution, supply chain inefficiencies, and missed opportunities, resulting in underperformance compared to peers like AutoZone and O'Reilly [3]. Recent Developments - In 2023, Shane O'Kelly was appointed CEO, bringing operational expertise to streamline the supply network and refocus on core profitability [4]. - Activist investors Third Point and Saddle Point joined the board in 2024, driving cost efficiencies and strategic discipline to accelerate the turnaround [4]. - AAP is consolidating distribution centers, expanding market hubs, and improving working capital efficiency to restore sustainable margin growth [4]. Performance Outlook - With improving operational execution and industry tailwinds supporting consistent demand, AAP's transformation under O'Kelly is expected to lead to a return to profitability [5]. - The stock has appreciated approximately 25.57% since December 2024, indicating that the bullish thesis is beginning to materialize [6].