What the Advance Auto Parts Upgrade Means for Mutual Fund Investors (AAP)

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What the Advance Auto Parts Upgrade Means for Mutual Fund Investors (AAP)

Shauna O'Brien Jan 08, 2015

On Thursday morning, Deutsche Bank upgraded Advance Auto Parts (AAP). Here’s what the move means for mutual fund investors.

Inside the Analyst Move

Deutsche Bank raised its rating on Advance Auto Parts (AAP) from “Hold” to “Buy” on Thursday. The firm has also given the company a $180 price target, suggesting an 11% increase from its current price.

According to analyst Mike Baker: “Historically, the auto parts retailers see the greatest benefit from lower gas prices and as a result, we are increasing our comp and EPS estimates for AAP (and ORLY). We are also increasing estimates due to our belief that AAP should be able to drive higher than expected synergies from its General Parts integration. As a result, we are increasing our price target to $180 from $150 for AAP and raising our rating to Buy from Hold as we look to add exposure to the auto parts group to play the lower gas theme, especially given relatively reasonable valuation.”


Red Hot Sector

In 2014, Advance Auto Parts soared over 40% as the auto parts industry benefited from consumers keeping cars longer. The sector could continue to outperform if there is a downturn in the economy. At just 19x 2015 earnings estimates, AAP is fairly valued and could be a good pick for investors seeking exposure to the industry.

Mutual Funds to Watch

Investors interested in AAP may also be interested in the funds listed below. These funds currently have the largest stakes in the company.

The Bottom Line

The funds above offer investors a diverse group of holdings. Investors interested in AAP may also be interested in Johnson Controls (JCI) or Auto Zone (AZO).

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