Advance Auto's 2010 sales will likely increase 5-7% in 2010, followed by a 4-6% gain in 2011, boosted by the opening of about 150 new stores. Same store sales should increase 4-6% in 2010.
Also, margins should increase, aided by efficiency improvements, and market-appropriate prices.
The First Call FY2010/FY2011 EPS estimates for AAP are $3.80 to $4.35. Each EPS estimate looks about 5% low, according to my analysis.
Technically, Advance Auto's chart is strong -- a rare sight in this economy: Shares have formed a staircase. There will be resistance at $60, but the calculation here is that the uptrend is stronger and should prevail.
2010 Outlook: I view Advance Auto as a long-term play, but if investors are looking to sell AAP within the year, it's probably best to take your profits after it rises to $67-69, if it fails to rise above $70.
I'd also raise the sell/stop loss to $44 from $22, making this a zero-loss trade for your May 2009-bought shares.
Stock Analysis: I consider Advance Auto Parts to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in AAP now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of my AAP position before November 2010 and I'd put a sell/stop loss at: $44.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.