AAP Moves Higher After Beating Q1 Earnings Estimates

Further pessimism could unwind for AAP

Assistant Editor
Jun 2, 2021 at 9:45 AM
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Advanced Auto Parts, Inc. (NYSE:AAP) stepped into the earnings confessional this morning, reporting first-quarter earnings of $3.34 per share, which beat Wall Street's projections while its revenue of $3.33 billion was in line with estimates. In addition, comparable-store sales for the quarter increased slightly more than was forecasted, after the automotive parts provider saw strong sales growth from both the "do-it-yourself" crowd and professional customers. In response, AAP is slightly higher, last seen up 1.2% to trade at $196.88 in electronic trading. 

On the charts, AAP has moved lower since nabbing a May 10 all-time high of $210.18. Now working its way back toward that record peak, thanks to a bounce off its 70-day moving average, Advanced Auto Parts stock set to topple its 40-day moving average for the first time in six sessions. Year-to-date, the security is up 23.6%.

A short squeeze could fuel even more tailwinds for AAP stock. Though short interest fell 11.6% in the most recent reporting period, the 3.23 million shares sold short still make up 5% of the stock's available float, or nearly four days' worth of pent-up buying power. Simply put, a further unwinding of pessimism among short sellers could push Advanced Auto Parts stock even higher.

An unwinding of pessimism in the options pits could keep the wind at the equity's back. This is per AAP's s Schaeffer's put/call open interest ratio (SOIR) of 1.24, which stands higher than all but 2% of readings from the past year. In other words, short-term option traders have rarely been more put-biased. 

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