Shares of Advance Auto Parts (AAP – Get Report) are gaining by 6.45% to $181.50 in pre-market trading on Wednesday, after activist investor Starboard Value bought a 3.7% stake in the company, the Wall Street Journal reports.
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In a letter to Advance Auto Parts CEO Darren Jackson, Starboard said that it believes the company can boost its stock price to more than $400 per share – more than double its current level – by improving margins and working capital, realizing the value of its Worldpac brand and putting in place a daily delivery program to help increase commercial sales.
Given the headlines, it’s no wonder Advance Auto Parts (AAP) shares are up a whopping 11% on Wednesday.
The activist investor is also encouraging Advance to consider “unlocking…”
Starboard Value disclosed 4.5 percent stake in regional TV broadcaster Media General Inc on Tuesday and urged the company to sell itself to Nexstar Broadcasting Group Inc and scrap its plan to buy Meredith Corp.
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On the off chance you’re reading this and haven’t heard yet, hedge fund Starboard Value was very clear this morning that it thinks AAP stock could be worth 0 per share (or more) in light of its growth opportunities. (NYSE:AZO) and O’Reilly Automotive Inc (NASDAQ:ORLY), the latter of which was recently ranked by Goldman Sachs as one of the top quality stocks in the consumer discretionary sector. O’Reilly is up 26%, and AutoZone is up 17%, mirroring the benefits derived from lower gas prices. The presentation points out that despite this tremendous margin improvement opportunity and a best-in-class business mix, the company now trades at an approximately two- to five-turn discount to its peers on an EBITDA multiple basis.
