Jabran Kundi
3 min read
In This Article:
We recently published a list of 20 Underperforming Stocks Targeted By Short Sellers. In this article, we are going to take a look at where Advance Auto Parts, Inc. (NYSE:AAP) stands against other underperforming stocks targeted by short sellers.
Short interest refers to the percentage of publicly available shares that have been sold short. It is an indicator used by many investors to determine how strong a company’s bear thesis may be. Due to the nature of short selling, the short interest has become a popular indicator among investors.
The reason it is given so much weightage is that people betting against a stock have usually done solid research and are confident of a company’s downfall. They take unlimited risk, so when big investors or the smart money shorts a stock, people take notice. They try to unearth the red flags that may have prompted the high short interest.
We decided to dig deeper and try to find out where smart money sees trouble ahead. To come up with our list of 20 underperforming stocks targeted by short sellers, we looked at the worst-performing stocks of the last six months and then ranked them by the short interest.
A manufacturing facility floor filled with an array of automotive parts and accessories.
Short interest: 15.36%
6 months’ performance: -11.35%
Advance Auto Parts, Inc. (NYSE:AAP) operates as an automotive aftermarket parts provider. It provides brakes and brake pads, batteries and battery accessories, exhaust systems and parts, radiators and cooling parts, steering and alignment parts, belts and hoses, and other products.
Advance Auto Parts (NYSE:AAP) significantly improved its financial position in the latest quarter with $1.87 billion in cash. AAP reduced its net debt to $1.8 billion from $3.8 billion in Q3 2024, which further justifies its balance sheet strength. Additionally, the company took a restructuring initiative to close approximately 200 independent locations and 500 corporate stores. These closures are aimed at saving $60 to $80 million in annual costs.
Despite all these positives, there are no short-term catalysts for the company’s investors. Based on the guidance, Q1 does not seem encouraging. The firm expects about a 2% decline in same-store sales. The reality could be even worse for the company as tough macro conditions, coupled with a poor environment for auto stocks, are set to deal a double blow.
Overall, AAP ranks 14th on our list of underperforming stocks targeted by short sellers. While we acknowledge the potential of AAP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than AAP but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
