Advance Auto Parts Stock: Old Vehicles Require Continued Maintenance (NYSE:AAP)

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Advance Auto Parts, Inc. (NYSE:AAP) is a leading automotive aftermarket parts provider in North America. The types of products sold by the company include parts & batteries, accessories and chemicals, and engine-related maintenance products, such as air filters and transmission fluid. Their customers include both professionals and DIYers. As of December 31, 2021, sales to professionals accounted for nearly 60% of total net sales.

As an aftermarket parts supplier, AAP benefits from providing automotive solutions to older vehicles that need more continuous repairs & maintenance. In the current market environment, AAP is poised to benefit from widespread affordability constraints of purchasing a vehicle.

In May 2022, the average new-vehicle transaction price is expected to reach nearly +$45K, which would be up 16% from 2021. Prices for used cars offer no better alternative, with prices up nearly 30% from January 2021. As such, there is a greater likelihood of individuals holding onto their cars for as long as they can. In fact, the average age of vehicles on U.S. roadways reached a record high of 12.2 years in 2021. For AAP, this means increased demand for brakes and brake pads, batteries, tires, and other accessories.

AAP also benefits as total vehicle miles traveled increases. In 2019, total miles driven reached 3.26T, before plummeting to 2.83T during the height of the COVID-19 pandemic. The data has since improved and is now at or near 2019 levels. With increased travel comes greater maintenance requirements.

U.S. Federal Highway Administration, Moving 12-Month Total Vehicle Miles Traveled [M12MTVUSM227NFWA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/M12MTVUSM227NFWA, May 28, 2022.

U.S. Federal Highway Administration, Moving 12-Month Total Vehicle Miles Traveled [M12MTVUSM227NFWA], retrieved from FRED, Federal Reserve Bank of St. Louis

With the wind at their back from an aging vehicle fleet and total miles driven, one would not expect AAP to be underperforming the broader market. Yet, AAP is down nearly 20% YTD, which is worse than the S&P’s 13% decline over the same period. For investors seeking an under-the-radar play in the automotive sector, AAP is one name worth extra attention.

Earnings Review and Other Reportable Events

In the first quarter ended April 23, 2022, AAP reported total net sales of +$3.4B, which was up 1.3% from the same period last year, but +$20M short of estimates.

Through the first ten weeks of the year, AAP had a strong start, with YTD comparable store sales up mid-single digits. The final six weeks, however, came under pressure from flagging DIY sales, resulting in mid-single digit declines in comparable sales.

Weighing on the DIY comparisons were the impacts of economic stimulus payments in the prior year and a slower start in the current period, especially in the northern regions, due to colder and wetter weather patterns.

Despite weakness in DIY, overall comparable store sales were up 0.6% from the prior year and 25.3% on a two-year basis. The increase represented the 8th consecutive quarter of comparable store sales growth. Likewise, both adjusted operating income and adjusted EPS grew for the 8th straight quarter.

Gross profit margins came in at 44.6%, which was

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Volkswagen, top rated shareholder strike framework deal for Porsche stock featuring

FRANKFURT/BERLIN — Volkswagen Team and its prime shareholder Porsche Automobil Holding SE have entered a framework settlement for a feasible inventory current market listing of legendary sports activities automobile brand name Porsche, edging closer to what could grow to be one particular of the world’s premier stock market place debuts.

The potential IPO could transpire as quickly as the fourth quarter of 2022, Arno Antlitz, the main fiscal officer of mum or dad Volkswagen Team, reported.

Outlining the important actions of this kind of a transaction, Antlitz claimed VW would update markets about the development and timeline of a listing in late summer months.

“The precise feasibility of an IPO depends on several various parameters as properly as basic current market situations,” VW explained in a assertion on Thursday. “No last selections have nonetheless been taken.”

The announcement arrives on the heels of Russia’s invasion of Ukraine, which has sparked volatility throughout world markets and worries of greater vitality prices.

Europe’s largest automaker introduced two times back it mapped out a framework for a achievable offer and was in sophisticated talks about an IPO of the group’s most profitable division. An offering would carry the group’s valuation and support fund its change towards electric cars.

“For me, this marks an inflection issue and the ideal timing for the opportunity transaction in buy to ignite our EV change momentum,” VW Team CEO, Herbert Diess, said.

The prepared listing, approximated to price Porsche at as substantially as 85 billion euros ($95.3 billion) by Bloomberg Intelligence, would partly reverse a tumultuous takeover of the Stuttgart-based company a lot more than a decade ago.

VW exposed far more specifics of a probable IPO on Thursday. The brand’s share funds would be split 50 p.c involving favored shares, which really do not have voting rights, and 50 % widespread shares with voting rights.

Up to 25 percent of the chosen shares could be bought on the funds market place and Porsche Automobil Holding, the most important financial commitment car of the Porsche and Piech billionaire proprietor spouse and children, would purchase 25 per cent furthermore one particular share of the common shares. This would give the family members a blocking minority on strategic decisions.

Volkswagen will suggest the distribution of a specific dividend in case of a prosperous IPO amounting to 49 per cent of the overall gross proceeds. This would enable the Porsche and Piech households to finance their acquisition of the immediate stake in what utilized to be their spouse and children organization.

Reuters contributed to this report.

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O’Reilly Automotive: Bet On This Aftermarket Auto Parts Stock (NASDAQ:ORLY)

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Investment Thesis

O’Reilly is growing its business and expanding its market reach. The company has shown consistent sales growth and robust operating profitability. Despite the pandemic, the company’s performance was strong. The company’s effective market strategy, increasing customer reach, strong distribution network, and experienced team makes its stock a buy.

An Overview of the company

Missouri based O’Reilly Automotive, Inc. (ORLY) is one of the nation’s leading specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories, catering to both professional and do-it-yourself customers. The O’Reilly family founded the company in 1957, and as of December 31, 2021, it had 5,784 outlets in 47 states in the U.S. and 25 stores in Mexico.

Product and Distribution

O’Reilly Automotive outlets offer a diverse range of products, including:

• alternators, batteries, brake system components, belts, chassis parts, driveline parts, engine parts, fuel pumps, starters, antifreeze, appearance products, engine additives, filters, fluids, lighting, oil, wiper blades, etc.

• accessories, such as floor mats, seat covers, truck accessories, etc.

The company’s stores offer varieties of upgraded services and programs to the customers, such as battery diagnostic testing, battery, wiper and bulb replacement, check engine light code extraction, custom hydraulic hoses, drum and rotor resurfacing, electrical and module testing, loaner tool program, professional paint shop mixing and used oil, oil filter, and battery recycling.

O

O’Reilly Automotive

Customers research options before buying a part or a product. Customers’ purchase decisions are influenced by a variety of experiences, whether in-person, over the phone, or through a variety of digital channels. O’Reilly’s omnichannel goal is to provide customers with a better and more seamless research and buying experience across all these channels.

The company provides a regional distribution network which allows it to optimize product availability and inventory levels across its store network. The company’s inventory management and distribution systems connect each of its stores to one or more distribution centers, working for effective inventory control and administration.

Industry Factors

The number of miles driven, the number of registered vehicles, new light vehicle registrations, and average vehicle age, are the major drivers of present and future demand for items offered in the automotive aftermarket.

Number of Miles Driven: The demand for repair and maintenance items offered in the automobile aftermarket is influenced by the total number of miles travelled. Cars in the U.S. are driven over three trillion miles per year, resulting in continuing wear and tear and a corresponding demand for repair and maintenance goods to keep these vehicles running.

Size and age of the vehicle fleet: The demand for items offered in the automotive aftermarket industry is highly influenced by the total number of vehicles (car park) and the average age of the vehicle population. As the average age of vehicles on the road rises, more miles are driven by vehicles that are no longer covered by the manufacturer’s warranty. Older automobiles that are out of warranty produce a lot of demand for automotive aftermarket products since they go through

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Nvidia Stock: Auto Business May Drive Continued Performance (NASDAQ:NVDA)

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NVIDIA (NVDA) has been on an incredible run of late, fueled by tremendous growth across its business segments. Revenue has more than doubled over the past 3 years, resulting in explosive economies of scale. Gross margins are up nearly 500 basis points while operating margins are up over 900 basis points. Free cash flow has increased by 2.3 times over that span.

NVDA growth and margin expansion

NVDA (NVDA Investor Presentation)

While the business itself is clearly very strong and growth momentum is impressive, the expected slowdown in growth and the premium valuation multiples attached to the stock – even after the recent pullback in the share price – imply that it is not a Buy at the moment. On the other hand, the explosive growth potential in the automotive business could be an x-factor that drives continued outperformance for the company. In this article, we will overview the business as a whole and then discuss the qualitative aspects of the automotive business that indicate massive growth could materialize there.

NVDA Stock Has A Wide Moat Business Model

Even more importantly, the company possesses a wide moat due to its intellectual property. Thanks to its leading position in the GPU space, the company plays an integral and increasingly prominent role in the global economy.

As the leader in the space, NVDA is able to attract among the very best talent in the industry that it retains through generous compensation packages and a large research and development budget. In our view, this positions the company to retain its technical edge in the industry and continue to innovate to compound its intellectual property driven competitive advantages. This makes the business model fairly low risk and gives it tremendous long-term potential. We also see this competitive advantage on display in its superior profitability metrics compared to its rival Intel (INTC):

Nvidia vs Intel: return on equity and return on invested capital
Data by YCharts

NVDA Stock Has A Massive Growth Runway

Thanks to its world-class brain trust, strong base in technology and basic research, and strong macro tailwinds for its industry, NVDA has nearly limitless opportunities to grow. The company has already begun expanding into new markets, including data centers and autonomous driving:

NVDA Investor Presentation

NVDA (Investor Presentation)

These initiatives have already gained substantial momentum as its data center business saw 53% year-over-year growth in the first nine months of 2021 and its automotive business saw 13% year-over-year growth in the first nine months of 2021.

Meanwhile, its core gaming business soared by 72% year-over-year and its professional visualization business was its fastest-growing business, up 97% year-over-year, though it is still dwarfed in size by its gaming and data center businesses.

Long term, the data center and the automotive businesses should see significant sustained growth as both markets are massive and set to grow for many years to come. With artificial intelligence technologies exploding as well as the metaverse just beginning to take off, NVDA has enormous potential to increase the applications of and markets for its technologies.

One way in which NVDA has been aggressively pursuing

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Rivian Stock Is Dropping. Blame Amazon.

Text dimension

Amazon has requested 100,000 supply vans from Rivian.


Courtesy Amazon

Inventory in Rivian Automotive is falling speedy mainly because it looks the start-up has opposition in supplying electric powered vans to Amazon.com, a person of its investors.


Rivian
stock resumed its slide Thursday, falling another 11% to about $80. That is just a hair above its initial community featuring value.

On Wednesday, Rivian (ticker: RIVN) inventory closed down additional than 11% at about $90.01 a share, even though the


S&P 500

fell 1.9% and the


Dow Jones Industrial Common

dropped 1.1%. The current market weakened as the minutes from the latest meeting of the Federal Reserve’s charge-setting committee, designed general public Wednesday afternoon, led to anticipations for tighter financial policy to battle inflation.

But earlier Wednesday, right before the Fed information strike stocks,


Stellantis
(ticker: STLA) and Amazon (AMZN) experienced announced a collaboration that was centered on motor vehicle computer software. The news launch, nevertheless, also said Amazon will be the very first business shopper for the Ram Promaster electrical van. That places Stellantis instantly in competition with Rivian for Amazon company. Amazon has requested 100,000 of Rivian’s electrical shipping vans as perfectly.

Amazon has been a longstanding Stellantis consumer, taking tens of countless numbers of standard vans and including them to its shipping and delivery network. Stellantis, it looks, doesn’t want to cede all the EV business to an upstart.

While the news gave Rivian investors a get started, Amazon has requested EVs from other motor vehicle producers ahead of this. Amazon requested 1,800 electrical delivery automobiles from Mercedes in late 2020.

“We’re psyched to collaborate with Stellantis to completely transform the automotive sector and re-invent the in-motor vehicle encounter,” reported Amazon CEO Andy Jassy in the company’s news release. “We are inventing solutions that will assistance permit Stellantis to speed up connected and customized in-car experiences, so that each individual moment in movement can be smart, protected, and tailor-made to each and every occupant.”

Jassy was conversing, in section, about the program collaboration. Carlos Tavares, CEO of Stellantis, is thrilled about that, but probably is delighted to have the device profits quantity as well.

Just how several vans Amazon will acquire is not known. Amazon was not immediately accessible to remark on its delivery designs. The corporation says it has 70,000 Amazon-branded autos on the roads.

Rivian inventory had an extraordinary start out adhering to its November preliminary public featuring. The stock was priced at $78 and traded as high as $179.47 about a week afterwards, whilst it may possibly have flown also considerably, too quick. The share selling price has been nearly lower in half considering that then.

At about $90 a share, Rivian is even now valued at roughly $90 billion, centered on its completely diluted share depend, which includes factors this kind of as management stock possibilities. That is roughly equivalent to the sector capitalizations of


Ford Motor
(F) and Standard Motors (GM).

Rivian started out making its R1T electric powered pickup

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Marketing Straightforward, Replenishing Stock Difficult for Motor vehicle Dealers

Providing automobiles has turn out to be the straightforward section for car dealers these days. The really hard part is replacing what you bought.  

“It’s just difficult we’re striving to fill the holes,” CARite Auto Group CEO Jeff Bartlett says of a nationwide dealership inventory dearth brought on by a microchip lack that has compelled automakers to reduce creation.

CARite operates 25 dealerships in six states. Restocking stock is hard, he says. “No facility is overstocked, but there are more than enough vehicles to have a existence.”

Automobile auctions are standard go-to places to receive inventory. But currently, those people have turned into some thing like war zones due to the fact of stiff levels of competition amid bidders. 

“The fleet fellas are battling with us in the pit for used cars,” Bartlett (pictured, down below remaining) states. That escalated auction motion is driving up wholesale costs. “It’s tricky for dealers to spend $1,000 about for a auto, and then provide it at a competitive rate,” he suggests. CARite’s business enterprise product is to value autos “to sell them, not negotiate them.”

But to provide them, it initial needs to procure them through several indicates, together with buys from individual homeowners. Accordingly, a section of CARite’s site is titled “We’ll Invest in Your Auto.”

Bartlett spoke on a panel in the course of a modern on line supplier meeting that was component of Informa’s Automotive Tech 7 days meeting collection. WardsAuto and Wards Intelligence are part of Informa.

The current stock scarcity also is affecting dealers’ services departments. That is mainly because there are much less loaner cars to give prospects as a courtesy whilst their cars are in for repairs or servicing.

As dealer inventories thinned out, loaner fleets went from consisting of fairly new vehicles, to qualified pre-owned types, to applied cars to 3rd-get together rentals, suggests panelist Andrew DiFeo, standard manager of Hyundai of St. Augustine (FL).

Now, he notes, Lyft, a ride-sharing corporation, presents rental automobiles to company departments for use as loaners. Automakers assistance with the fees, he adds.

“People normally do not associate Lyft with dealerships,” suggests panelist Elena Ciccotelli, Lyft’s automotive partnerships director.  

Panelists explore one more scorching sector topic: digital car retailing. It received level of popularity during the height of the COVID pandemic and is however likely robust, but with missteps right here and there.

A lesson acquired is that the shift from on the internet to in-retail store experiences will have to be seamless, states DiFeo. “That’s not often the situation.” Sellers who can “bridge the gap” so that clients are not setting up from scratch when they shift from online to offline “will be the winners shifting forward.”

Michelle Denogean, main marketing and advertising officer at Roadster, a supplier of electronic retailing instruments for seller web-sites, agrees.

“As a dealer, you are in worst condition if you assure a seamless on-line-to-offline vehicle acquiring experience and then really don’t deliver it,” she suggests.

She provides: “Dealers really don’t imagine they

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