Analysts are bailing on this auto parts retailer after a massive earnings miss

Published Thu, Jun 1 20237:01 AM EDTUpdated Thu, Jun 1 202312:04 PM EDT

Advance Auto Parts ' massive earnings miss has drawn strong analyst concern. Both Goldman Sachs and JPMorgan Chase downgraded Advance Auto Parts to neutral Thursday. They also slashed their price targets to $82 and $84, respectively, from $165 and $155. The car parts retailer has plummeted more than 50% year to date, with much of that drop coming after Wednesday's quarterly report . Advance Auto Parts reported an adjusted 72 cents per share, far below expectations of $2.57 from analysts polled by Refinitiv. The company also missed revenue estimates, reporting $3.42 against a forecast $3.43 billion. The company pointed to supply chain difficulties as well as price pressure and higher professional sales costs for the weak quarter. Shares dropped 35% Wednesday for its worst day on record. AAP YTD mountain Advance Auto Parts stock is down more than 50% in 2023. "1Q's results and guidance cut (after providing its outlook mid-quarter on Feb 28) suggests management over-earned last year as it sought to control the controllables and deliver what their investor targets emphasized (i.e., price and structural margins, respectively)," JPMorgan analyst Christopher Horvers said. Horvers added the company's struggles have been ongoing for some time, given Advance Auto Parts has been looking to turn a meaningful corner for more than 10 years. "AAP has also been an in-and-out again turnaround story since we started covering the stock in 2008, so whomever takes over has a big job ahead, which creates reinvestment and reset risk," he said. Meanwhile, Goldman Sachs analyst Kate McShane said the company's lack of guidance on who will take over as chief executive could weigh further on the stock. "We also note a lack of clarity regarding the company's pending CEO transition which could impact AAP's ability to stem share losses and improve margins in the near term. Further, we do not see a clear catalyst to drive a multiple re-rating at this time," she said. Bank of America also downgraded Advance Auto Parts to neutral Thursday and slashed its price target to $85 from $178. "The biggest driver of the bottom-line miss in 1Q was margin pressure, which was driven by inflation (product costs, labor) and new store expenses that were not offset by pricing," Bank of America's Elizabeth Suzuki said. — CNBC's Michael Bloom contributed to this report.