What is Taking place
Car components retailer Progress Car Components ( AAP ) has experienced a tricky calendar year, with shares down fifty three.% on the calendar year. The organization will report its third-quarter numbers November 14, with the consensus contacting for earnings of $.85 per share, down from $one.seventy three all through the exact same period final calendar year.
AAP was just lately buying and selling at $eighty.12, down $97.71 from its 12-month large and just $one.31 previously mentioned its 12-month lower. Technological indicators for AAP are bearish and the stock is in a solid downward trend. The stock has latest assist previously mentioned $seventy eight.eighty and has latest resistance below $83.twenty five. Of the twenty analysts who go over the stock, seven fee it a “solid get”, two fee it a “get”, 8 fee it a “keep”, one particular costs it a “provide”, and two fee it a “solid provide”. AAP gets a rating of 31 from InvestorsObserver’s Inventory Rating Report.
AAP stock has been slipping steadily in excess of the final calendar year, as earnings have been on the drop. Earnings are forecast to drop 27.eight% all through the recent calendar year prior to rising eighteen.four% in 2018. With the latest weak spot in the stock, the AAP now has a P/E of just 16.3, which is attractive, but specified the forecast earnings drop the valuation alone will not protect against more downside really should the firm’s quarterly numbers disappoint. Not only have earnings been slipping, the organization has missed estimates each and every of the final a few quarters, and an additional earnings miss out on would drive shares even reduced. The road is not extremely optimistic for the latest quarter, with a whisper variety of $one.22 per share, which is in-line with the consensus. If genuine success are far better than envisioned the stock really should get pleasure from a significant bounce, but any signal of weak spot will guide to further losses in the stock, so shareholders really should have a crystal clear exit tactic in area just in case the success are reduced than envisioned.
Inventory Only Trade
Presented the all round pessimism in the stock, I would not propose a stock-only trade on AAP at the recent time.
If you want to established up a bullish hedged trade on AAP, look at a January 60/sixty five bull-set credit history spread for a 45-cent credit history. That is a potential nine.nine% return (fifty one.six% annualized*) and the stock would have to drop eighteen.3% to cause a challenge.
If you want to consider a bearish stance on the stock at this time, look at a January one hundred/one zero five bear-connect with credit history spread for a forty-cent credit history. That is a potential eight.seven% return (45.3% annualized*) and the stock would have to increase twenty five.3% to cause a challenge.
Protected Contact Trade
If you like the stock, but want to reduced your expense basis on a new placement, you may well want to look at a January $seventy five.00 included connect with. Obtain AAP shares (usually one hundred shares, scale as ideal), even though promoting the January $seventy five.00 connect with for a debit of $70.ten per share. The trade has a target assigned return of seven.%, and a target annualized return of 36.eight% (for comparison functions only).