Advance Auto Parts Maintaining Momentum as Pandemic, Recovery Unfold; Shares Trade Fairly

Our $207 fair value estimate for narrow-moat Advance Auto Parts should rise by a mid-single-digit percentage to reflect solid second-quarter results. As expected, Advance saw rebounding professional segment sales (double-digit growth) as American life started to normalize, but we are encouraged that its do-it-yourself operation held fairly steady. The quarterly results do not alter our long-term perspective (3%-4% top-line growth, low-double-digit operating margin over the next decade), and while we have long held a favorable view of Advance’s ongoing turnaround, we suggest investors await a more attractive entry point.