Advance Auto Parts (AAP) may see "new hope" arising from its Q3 results in mid-November, Wedbush Securities said Tuesday in a note to clients.
Wedbush said it expects the company to deliver "lackluster" Q3 results, which will likely be a "modest miss" compared with consensus estimates.
However, the investment firm also expects positive updates regarding the company's main 'RemainCo' business following the sale of Worldpac, which is anticipated to be finalized by the end of the year.
"Combined with very attractive valuation and extremely negative sentiment, this leads us to upgrade our rating," the note said.
"We expect [Advance Auto] to report Worldpac as discontinued operations and provide pro forma key data for RemainCo including D&A, operating profit and accounts payable, giving analysts and investors a much better understanding of trends, profitability and value (many analysts in the consensus still include Worldpac in their estimates into 2025)," Wedbush said.
Wedbush said it anticipates Advance Auto to come up with a reliable strategy to secure mid-single digit medium-term profit margins for RemainCo based on its projection of around 2.0% in 2024.
The investment firm upgraded Advance Auto to outperform from neutral, with a $55 price target.
Advance Auto shares were rising nearly 2% in recent trading.
Price: 40.14, Change: +0.67, Percent Change: +1.70
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