Wedbush Securities analyst Seth Basham says his top stock pick right now is Advance Auto Parts, Inc. (AAP). He says the company is starting to have some synergies drop to the bottom line after its landmark acquisition of General Parts.
“At the same time, given the integration complexity, Advance hit a couple of speed bumps along the way over the course of the past six months, and that slowed their earnings growth in the first quarter, as well as their sales growth,” he says.
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That created an opportunity, of sorts, for investors. Basham says the stock “gyrated” over the last few months and then bounced up a bit after an earnings report that wasn’t as bad as many had anticipated. Advance is now on track to narrow the large comp and margin gap it has with its peers, he says.
“So you have a self-help story there for a company that’s reorienting itself to the higher secular growth commercial segment,” Basham says. “At the same time you have a valuation discount to peers. So all three of those things combined create a pretty powerful investment story if the company can execute, in our view.”
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